2014 investment priorities plan

P H I L I P P I N E S

I N D U S T R Y D E V E L O P M E N T

F O R I N C L U S I V E G R O W T H



BOARD OF INVESTMENTSBOARD OF INVESTMENTS

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M I S S I O N

We, the BOI family, are committed to generate local and foreign invesments and develop globally competitive industries, thus, increasing employment through the responsible use of the country’s resources, guided by the principles of private initiative and government cooperation. In pursuit of these commitments, we bind ourselves to render competent and efficient service with utmost integrity and professionalism. Ours is a challenging task, yet with discipline and the guidance of an enlightened and strong leadership, we shall move forward.

2014 INVESTMENT PRIORITIES PLAN 12014 INVESTMENT PRIORITIES PLAN 1

C O N T E N T S

Memorandum Order No. 74 dated 28 October 2014 3Message of the President of the Philippines 4Foreword: Message of DTI Secretary Gregory L. Domingo 5

Executive Summary of the 2014 Investment Priorities Plan 7

The 2014 Investment Priorities Plan 11I. Introduction 12

The New IPPII. A New Industrial Policy 14

Reviving and Transforming Philippine ManufacturingA. The Manufacturing Resurgence ProgramAction Agenda

III. The 2014 IPP: A New Approach 19A. Evidence based and InclusiveB. Objectives and StrategiesC. The Evaluation Process

IV. Preferred Activities of Investments 24

Appendices 311 – Sectoral Analysis 322 – ADB’s Top 20 “Nearby” Products Based on

Sophistication Level and Labor Intensity 803 – Output Multipliers, Income Multipliers, Employment

Multipliers, and Production Linkages 824 – References 85

Memorandum Circular no. 2015- 01General Policies and Specific Guidelines to Implement the Investment Priorities Plan (IPP) 2014 - 2016 87

A. Prefatory Statement 88B. General Policies 89C. Definition of Terms 96D. Specific Guidelines 102ANNEx A - List of Less Developed Areas (LDAs) 118ANNEx B - Indigenous Raw Material 121ANNEx C-1 - Preferred Locations for General Hospitals

(levels 1, 2 and 3) 123ANNEx C-2 - Preferred Locations for General Hospitals

Level 3 126ANNEx D - Incentives for BOI-Registered Enterprises 127

S E R V I C E STo meet investors’ diverse requirements, BOI offers specialized services that include:

• Supplying knowledge-based market information• Analyzing your business feasibility• Linking you to the services chain• Matching you with foreign and local businesses• Nurturing your expansion and diversification• Profiling industries

BOARD OF INVESTMENTS2

2014 INVESTMENT PRIORITIES PLAN 3

Pursuant to Article 29 of the Omnibus Investment Code of 1987, as amended, the attached 2014 Investment Priorities Plan (IPP) is hereby APPROVED.

Further to the provision of said Article, upon effectivity of the IPP, all government agencies and entities are enjoined to issue the necessary regulations to ensure the implementation of this IPP in a synchronized and integrated manner. No government body shall adopt any policy or take any course of action contrary to, or inconsistent with, this plan.

The Chairman of the Board of Investments shall render an annual report to the President on the accomplishments and implementation of this plan.

This Order shall take effect fifteen (15) days after its publication in a newspaper of general circulation as required under Article 31 of the Omnibus Investment Code of 1987.

DONE, in the City of Manila, this 28th day of October, in the year of our Lord, Two Thousand and Fourteen.

By the President:

PAQUITO N. OCHOA, JR. Executive Secretary

MALACAÑAN PALACEManila

BY THE PRESIDENT OF THE PHILIPPINES

M E M O R A N D U M O R D E R N O . 7 4A P P R O V I N G T H E 2 0 1 4 I N V E S T M E N T P R I O R I T I E S P L A N


The past four years have seen the Filipino people come closer to the fulfilment of our great potential. After decades of being regarded as the Sick Man of Asia, our country, by following the straight and righteous path, has transformed itself into one of the fastest growing economies in the world, expanding at an average rate of 6.3 percent annually from the period of 2010-2013. Achieving this dramatic turnaround, while overcoming a long list of challenges and enduring a series of disasters and calamities, lends credence to the resiliency and strength of our people.

This performance has prompted the three major credit ratings agencies, Fitch, Moody’s, and Standard & Poor’s, to grant the Philippines investment grade status, a category that proves our capacity to meet our financial obligations, and would allow us the wherewithal to further pursue our initiatives towards inclusive growth. This year, Standard & Poor’s even gave us another ratings upgrade, from BBB- to BBB with a stable outlook, believing that, in their own words, “ongoing reforms to address shortcomings in structural, administrative, institutional, and governance areas will endure beyond the current administration.”

In the latest round of international surveys, the World Bank’s Doing Business Survey reports that the Philippines jumped 30 places to 108th out of 189

economies. The World Economic Forum has also improved its outlook on the Philippines. Since 2010, we have moved up 26 notches in the global competitiveness rankings, from 85th to 59th, which puts us squarely on the top third of economies around the globe. The country has also improved considerably in the Heritage Foundation’s Index of Economic Freedom, jumping 20 places since 2010.

All these manifest the basic truth that now is the best time to invest in the Philippines. I invite everyone to join the many companies who are now enjoying the dividends of their confidence in the country. My administration is bent on making the Philippines even more attractive to investors, which is why we remain committed to fast-tracking reforms, initiatives, and legislation that will facilitate the entry of new capital, improve business procedures, and enhance investor confidence in the country.

Beyond a mere guide for prospective investors, this Investment Priorities Plan (IPP) is an expression of our vision to create a more dynamic and progressive Philippines. Centered on the theme “Industry Development for Inclusive Growth”, this IPP aims to raise investments in infrastructure, agriculture, education, and health. It likewise aims to create jobs higher up the value chain, enhance the competitiveness of local industries, and expand our industries’ capacity to generate opportunities. It also identifies supply gaps in our economy and the geographical needs of the country to serve as the basis in granting incentives or other forms of support, so we may bring about growth that is equitable, comprehensive, and inclusive.

This plan is crucial in sustaining the pace of our growth in the coming years, especially as we prepare our industries and our people for our country’s impending integration into the ASEAN Economic Community by the year 2015. Through this IPP, we will usher in a policy of participatory development towards the attainment of our shared goals and the collective aspirations of the Filipino people.

The impressive results that we see today are the results of our push towards good governance. Imagine the heights that we can rise to if, together, we can give the Filipino people the means to maximize their abilities and demonstrate their limitless potential. Join us in reaping the fruits of our resurgence in the coming years, as we continue our journey on the straight and righteous path towards the fulfilment of our dreams and the realization of a truly just and prosperous society.

M E S S A g E O F T H E P R E S I D E N T O F T H E P H I L I P P I N E S

MALACAÑAN PALACEManila

BENIGNO S. AQUINO III

MANILAOctober 2014


F O R E W O R D

With its strategic shift of strategy towards industry development which it started in January 2012, the DTI-BOI has now taken a proactive role in steering the country’s industrialization, and thus a revisit of the annually published Investment Priorities Plan (IPP) became necessary.

This IPP effected major changes from previous IPPs as it takes off from Chapter 3 (Competitive and Innovative Industry and Services Sectors) of the updated Philippine Development Plan (PDP) 2011-2016, wherein six (6) broad sectors, i.e., agro-industry, manufacturing, IT-BPM, tourism, logistics and construction are prioritized. This will be a 3-year document that considers the end-of-plan targets of the PDP subject to an annual review.

With the updated PDP as its foundation, the IPP espousing the new industrial policy now serves both as a developmental tool for investment decisions of the private sector and a promotional tool for government to encourage first movers in new investment areas and to provide appropriate responses to the most binding constraints that prevent the entry of investments or industries from moving up the value chain. The new industrial policy aims to transform and upgrade the manufacturing industry with the long-term vision to develop globally competitive industries supported by strong forward and backward linkages.

In developing the 2014 List, a decision framework for the prioritization of economic activities was adopted. The framework focused on the potentials of the sectors to generate employment, move up the value chain, create spillovers and promote competitiveness in the market as well as closing the supply or value chain gaps as indicated in the sectoral roadmaps and available studies. The most binding constraints to the growth of the industries were identified and appropriate policy responses were recommended.

The IPP supports the thrust of the current Administration, thus, the theme “Industry Development for Inclusive Growth”, to emphasize that the Philippines is focusing on industry resurgence to promote sustainable and comprehensive growth.

In this connection, the 2014 IPP contains the following priority investment areas:

1. Preferred Activities that include 4 broad sectors (manufacturing, agribusiness and fishery, services, and infrastructure and logistics) and 4 specific activities (energy, housing, hospitals and PPP projects);

2. Export Activities that cover the production and manufacturing of export products, services exports and activities in support of exporters;

3. Activities with Special Laws that provide for either the mandatory inclusion of the activity in the IPP and/or the grant of incentives under E.O. 226; and

4. ARMM List, which encompasses priority investment areas that have been determined by the Regional Board of Investments of the Autonomous Region in Muslim Mindanao (RBOI-ARMM) in accordance with E.O. 458.

This IPP was formulated through a participative, analytical and multi-sectoral process. Four regional consultations were held in Metro Manila, Cebu, Davao and Baguio City, along with four sectoral (manufacturing, services, infrastructure and power, and agriculture and fishery) consultations. There were also two inter-agency consultative meetings conducted, peer review sessions with the country’s leading economists, and on-line consultation to encourage the widest participation possible nationwide.

GREGORY L. DOMINGO Chairman, Board of Investments Secretary, Department of Trade and Industry

BOARD OF INVESTMENTS6 BOARD OF INVESTMENTS6


EXECUTIVE SUMMARY2014 INVESTMENT PRIORITIES PLAN


The 2014 Investment Priorities Plan (IPP) was formulated based on the updated Philippine Development Plan (PDP) 2011-2016 and the new Philippine industrial policy. Its main objectives and strategies are consistent and aligned with the PDP’s primary goal of inclusive growth and its strategies focusing on promoting investments in physical infrastructure, transparent and responsive government, and human development.

The 2014 IPP takes off from Chapter 3 of the PDP, which envisions globally competitive and innovative industry and services sectors that contribute significantly to inclusive growth and employment generation. The emphasis is on improved business environment, increased productivity and efficiency, and enhanced consumer welfare.

The New Industrial Policy

Embedded in the IPP is the new Philippine industrial policy, which aims primarily to upgrade and transform the manufacturing industry to create more decent jobs. This strategic thrust provides the framework for an investment policy regime that focuses on improving productivity, developing human resources, and upgrading technologies.

Emphasis on reviving the manufacturing industry started in 2012 when the Department of Trade and Industry (DTI) and the Board of Investments (BOI) engaged industry associations to craft industry/sectoral roadmaps, plotting their industry’s contribution to sustain economic growth, among others. To date, 29 roadmaps have been submitted to the DTI-BOI, including the Manufacturing Industry Roadmap (MIR) formulated by the Philippine Institute for Development Studies (PIDS) based mainly on the roadmaps submitted by various industry associations.

To enable manufacturing firms to upgrade, thrive and become catalysts and engines for sustained and inclusive growth, the industrial policy focuses on implementing vertical (sector or industry specific) measures and horizontal (cuts across sectors) measures that address constraints to growth, and on institutionalizing

coordination mechanisms to ensure effective program implementation. The long-term vision of the MIR is to develop a globally competitive manufacturing industry supported by strong backward and forward linkages with both domestic and global supply chains.

Resurgence of Manufacturing

Complementing the policy of supporting the manufacturing industry is the Manufacturing Resurgence Program (MRP), designed to revitalize the country’s contracting manufacturing sector. The thrust is to intensify government intervention in addressing market failures and cumbersome business procedures.

The MRP is identified by the government as a priority program under National Budget Memorandum (NBM) No. 118, and designates the DTI as lead implementing agency. Other government agencies involved are: the Departments of Labor and Employment (DOLE), Science and Technology (DOST), Agriculture (DA) and Energy (DOE), and DOLE’s Technical Education and Skills Development Authority (DOLE-TESDA), Commission on Higher Education (CHED), Philippine Coconut Authority (PCA), National Power Corporation (NPC) and the National Electrification Administration (NEA).

Through the implementation of the MIR, the blueprint of the MRP, manufacturing contribution to the economy is targeted to account for 30 percent of total value added and generate 15 percent of total employment by year 2025.

The New IPP 2014-2016 Process

The new approach of the DTI-BOI in the formulation of the 2014 IPP adopts an analytical framework and a more rigorous process of identifying the priority economic activities to promote. The framework employs a mechanism for evaluating the potential contribution of these activities and industries to create quality jobs, move up the value chain, diversify the country’s industrial base, generate “spillover effects”, and engender a more competitive environment.

E X E C U T I V E S U M M A R Y


From this evaluation, the most challenging issues preventing the entry of new firms, and of existing firms from moving up the value chain are likewise identified. The process evaluates further the most effective government intervention to address these constraints – either through incentives or other policies and measures, or a combination of both (the sectoral analysis is found in Appendix 1 of the IPP).

Strengthening the research process of the 2014 IPP is a core group of prominent economists that conducted peer reviews and a series of consultation sessions with the public and private sectors and civil society. A total of four (4) sectoral/cluster, two (2) inter-governmental agency, and four (4) regional sessions were conducted. In addition, the draft 2014 IPP was posted on the BOI website for more interactive consultations with the public.

The 2014 IPP

The DTI-BOI pursues a more integrated approach that embeds the investment strategy into the country’s industrial policy and development plan. The new IPP focuses on competitiveness, skills development, technology upgrading, infrastructure modernization, and improvements in overall business environment. Together with the governance reforms and good macroeconomic performance of the Philippines in more recent years, this bodes well for attracting investments and achieving economic transformation.

Success stories from other countries have shown that having the right fundamentals simultaneous with an investment incentive program - placed within the context of national development strategies – results in increased investments. Research findings reveal that investment incentives are seriously considered in making investment decisions. In particular, when political and economic stability, infrastructure, transport costs are equal, taxes exert significant impact on enterprises.

In implementing the new approach, the DTI-BOI takes a more proactive role by facilitating and coordinating government efforts to correct market failures and encouraging producers to take risks. By creating an environment conducive for business to flourish and embarking on initiatives to strengthen industries, the government can promote the success of domestic firms in both the local and international markets. A favorable business environment will unleash the full potentials of our industries to take advantage of the market opportunities and become effective engines for sustained and inclusive growth.


2014 INVESTMENTPRIORITIES PLANINDUSTRY DEVELOPMENT FOR

INCLUSIVE gROWTH


I . I N T R O D U C T I O N

Since the Board of Investments (BOI) was established in 1987 under Executive Order No. 226, the Investment Priorities Plan (IPP) has been the country’s basic policy document that enumerated the areas or sectors of the economy that were deemed priorities of the state for investments and development. Government agencies and the private sector referred to the IPP when making investment decisions as well as promotional activities.

Every year, for the past 27 years, the IPP has been crafted by the BOI in consultation with government agencies and the private sector. After enough time is given to stakeholders to write position papers, the IPP is then consolidated and finalized. Without fail, the final form of the IPP was a list of specific economic activities and general economic categories (mostly, the latter) declared as priority activities.

Based on this list, fiscal incentives will be granted by the State for enterprises that venture into these priority areas, provided they qualify for certain criteria and fulfill the terms and conditions of their registration.

These incentives would typically include Income Tax Holiday from 4 years to a maximum of 8 years, depending on whether the activity is pioneering or not, provided the registered enterprise meets the targets of its project. Registered projects also have the privilege of importing capital goods free of duties. Other forms of assistance are provided to BOI registered enterprises to help ease their way into the business environment.

Although the IPP has served as a practical tool for identifying the State’s priority areas and economic activities as well as attract investors through incentives, there is a need to strengthen the IPP as a tool for industrial development and economic growth. Hence, this new approach of the IPP of 2014-2016.

The New IPP

Aligned with the goals, priorities and strategies of the updated Philippine Development Plan (2011-2016), the IPP takes off from the six priority areas of economic activity under the PDP, namely: agro-industry; manufacturing; IT-BPM; logistics; tourism; and, construction.

Departing from tradition, the 2014 IPP attempts to break down these general categories into specific economic activities that -based on industry studies, plans and roadmaps - are strategic or critical to complete or enhance a particular industry or product’s value chain. In other words, applying a modified and more rigorous methodology, the 2014 IPP is more strategic, targeted and focused. The PDP’s strategies, including investment in physical infrastructure, transparent and responsive government, and human development, are also carried over to the new IPP.

Directly relevant to the IPP is Chapter 3 of the updated PDP, which envisions a globally competitive and innovative industry and services sector that contributes significantly to inclusive growth and employment generation. Three broad themes permeate this chapter: improving the business environment, increasing productivity and efficiency, and enhancing consumer welfare.

Consistent with these goals and themes, the new IPP applies a framework of analysis that includes a set of criteria to identify the priority general or broad economic categories and specific economic activities. After this filtering stage is a process of understanding the key or “most binding” constraints that hamper growth and prevent more value added production. From this premise stems the analysis of which among the State’s reserve of policy tools and forms of interventions would be the most effective response to address these constraints, with fiscal incentives being one of the interventions.

After conducting a thorough study of the priority sectors, its subsectors and specific economic activities, and depending on the availability of quality industry roadmaps and studies, the 2014 IPP proceeds to enumerate the activities the government should incentivize to meet national development goals. Although the general objective of the new IPP is to target investment opportunities and needs that would fill gaps in the supply or value chain, boost sectors with latent or obvious competitive advantage, and offset market imperfections, broad economic categories on the list of investment priority areas/activities will still be present, nonetheless. It is simply not possible to have all the data and information needed to arrive at sound evaluation of each activity in the national economy.


To address the information gap, a few novel features were crafted for the 2014 IPP. First is the principle of geographical application which determines the relevance and impact of an economic activity in a particular region, province or a cluster of local government units. For instance, although a cold storage facility is included in the category of agricultural services to be incentivized, a project of similar nature will still go the evaluation process when it materializes. The BOI will evaluate it through a geographical analysis to determine if such a facility is lacking in the area where it is proposed to be constructed.

Second, instead of crafting a new IPP annually, the 2014 IPP will be a rolling three-year plan to ensure continuity, consistency and predictability – factors seriously considered by domestic and foreign investors. In order to improve the BOI’s monitoring

and assessment system for a successful execution of the IPP over a three-year period, the new IPP will be reviewed annually.

Finally, there will be new mechanisms of coordination and convergence among relevant government agencies to ensure the effective and efficient execution of the 2014 IPP, providing venues for enhanced partnership and cooperation with the private sector.

These unique features and the new approach transform the 2014 IPP from just a list of economic categories or specific activities to be incentivized into a policy instrument that lays down the State’s industrial policy, strategies, and the array of tools to be used to achieve meaningful and inclusive growth for priority industries identified in the PDP.


I I . A N E W I N D U S T R I A L P O L I C Y


Reviving and Transforming Philippine Manufacturing

A long hiatus in Philippine economic policymaking necessitates the mainstreaming into government thought and action, a new approach to industrial policy.

In early 2012, the DTI and BOI called on the private sector to craft industry roadmaps to envision the future of their industries or sectors; identify short, medium and long term goals; identify gaps in their supply chains; and propose recommended policy reforms and actions to grow their industries.

With DTI-BOI initiating and facilitating the industry roadmap project, the lead role of the private sector in crafting their roadmaps is an innovation that differentiates the new industrial policy from previous attempts of its kind in the country.

A second distinguishing feature of the new approach is its sharp focus or heavy emphasis on the country’s manufacturing sector as a key result area.

The country’s experience over the past two decades has shown that we cannot leapfrog industrialization and that relying on the services sector alone will not bring about sustainable and inclusive growth. A second leg, the manufacturing sector, is needed to support the country’s economy.

The historical performance of our manufacturing sector has, unfortunately, been weak, owing to the absence of the economy’s structural transformation - from one that is agriculture-based to one that is

I I . A N E W I N D U S T R I A L P O L I C Y industry-led. Observers have noted that the country’s industry sector has been quickly overtaken by services and that manufacturing has lagged behind those of other countries in the region.

With the advent of the ASEAN Economic Community in 2015, it is imperative to revive and transform our manufacturing industry into a catalyst to address the challenges and seize the opportunities of an integrated regional economy. This is the essence and main thrust of the country’s industrial policy.

This new industrial policy aims to upgrade and transform the manufacturing industry to one that addresses the most binding constraints to manufacturing growth, strengthen industries and improve the business environment within which they operate.

Formulated within the context of the PDP and the new industrial policy, the investment strategy focuses on improving productivity, human resource development, and technology upgrading.

A. The Manufacturing Resurgence Program

Adopting the policy objective to support the manufacturing industry, the national government has allocated Php2.3 billion for the Manufacturing Resurgence Program to support the implementation of the Philippine Manufacturing Industry Roadmap (MIR). As Figure 1 shows, the MIR aims to increase the contribution of manufacturing from the current 22 percent to 30 percent of total output and from 9 percent to 15 percent of total employment by the year 2025.


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1-2

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• globally competitive manufacturing industry with strong forward & backward linkages

OBJECTIVE : Industry Roadmap for Structural Transformation, Job Creation and Poverty ReductionGOAL : A globally competitive manufacturing industry supported by a strong parts and components sector

TARGETS: Manufacturing contribution of 30% of total value-added and 15% of total employment

Figure 1. MIR Objectives: Industry Roadmap for Structural Transformation,Job Creation and Poverty Reduction

Long Term

Medium Term

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21

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• shift to high value added activities• investments in upstream or core sectors• link & integrate industries within the economy

Short Term

• maintain competitiveness of comparative advantage industries• strengthen emerging products• rebuild existing capacity of industries

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In the short term (2014-2017), it is imperative to maintain the competitiveness of our industries with comparative advantage, strengthen emerging products, and rebuild the capacity of existing industries, especially those with strong potential to generate employment, address missing gaps, move up the product ladder and create linkages and spill-over effects in sectors such as automotive, electronics, food, garments, motorcycle, shipbuilding, chemicals, and allied or support industries. During this stage, the Philippines intends to deepen its participation in regional and global production networks of the automotive, electronics and garments industries.

In the medium term (2017-2021), there will be a shift to activities with higher value added, increase investments in upstream or core sectors (such as in the iron and steel and other metals industry, as well as in parts and components), and link industries within the national economy.

In the long term (by 2025), a globally competitive manufacturing industry with strong forward and backward linkages is envisioned as the Philippines plays a vital role in the regional and international production networks of automotive, electronics, garments and food. Our target is for the country to serve as a hub for regional and global production networks.

Action Agenda

To achieve these goals the new industrial policy calls for three basic action items or agenda: 1) proactively address the most binding constraints to manufacturing growth; 2) strengthen industries (raising industry competitiveness); and, 3) improve the business environment.

These actions or interventions must be aimed towards the following elements: (a) vertical measures; (b) horizontal measures; and, (c) coordination mechanisms. Below is an illustration of these interventions.

a) Vertical Measures. To achieve the specific objectives outlined in Figure 2, overcome the most binding constraints to growth, upgrade industries and make markets work, the following vertical or industry specific measures are recommended:

1. Address gaps in industry supply chains; and,

2. Expand the domestic market base and utilize it to grow exports.

b) Horizontal Measures. To address the cross-cutting constraints, the following horizontal measures are recommended:

1. HRD and Skills Training programs. Design human resource development and training programs to improve skills and form alliances with universities and training institutions. With educated and well-trained workers, it will be easier to learn new skills and enter new trades.

2. MSME Development and Innovation. Support MSME development through appropriate innovation incentives and mechanisms such as common service and R&D facilities, clustering, and industry-academe linkages for new product development and applied technology for indigenous products/raw materials. Grants, loans, innovation vouchers, and counterpart funding to innovative firms and technical assistance to promote long-term research collaboration between universities and business are also important.

3. Investment Promotion. Pursue aggressive and strategic promotion and marketing programs to attract more investments particularly foreign direct investments to introduce foreign technologies. Consolidate and intensify the investment promotion efforts of the BOI, PEZA, Clark Economic Zone, and Subic Bay Freeport Zone.

4. Business Environment Improvement. Improve the business environment by addressing smuggling, the high cost of power and domestic shipping (including port charges), and inadequate transport infrastructure. Expedite and facilitate the implementation of Public-Private Partnership (PPP) programs to finance ports, airports, highways, electricity grids, telecommunications and other infrastructure along with improvements in institutional effectiveness particularly in curbing smuggling.


5. Competitive Exchange Rate. Maintain a competitive exchange rate to support and strengthen the new industrial policy of the government. Manage the exchange rate in support of exports, prevent the surge of capital inflows and avoid excessive appreciation of the peso.

c) Coordination Mechanism. Throughout the processes of industrial transformation and industry upgrading, mechanisms are being established to coordinate policies and necessary support measures to address obstacles to

the entry and expansion of domestic firms. Towards this, the Philippine government revived the Industry Development Council or the IDC, consisting of representatives from national government agencies and stakeholders from the private sector. The IDC’s primary task is to ensure the effective and efficient implementation of the country’s Comprehensive National Industrial Strategy. This strategy will link manufacturing with agriculture and services; strengthen forward and backward linkages in the economy; and, build globally competitive Philippine industries.

• HRD & skills training• SME development• Technology upgrading, innovation, common facilities• Investment promotion• Power, smuggling, logistics & infrastructure• Competitive exchange rate

• Close supply chain gaps: - access to raw materials in furniture, garments, food processing - integration mechanism for copper, iron & steel and chemicals• Expand domestic market and exports: automotive and shipbuilding

open trade regime, sustainable macro policies, sound tax policies & administration, e�cient bureaucracy, secure property rights

Figure 2. Three Elements of the Manufacturing IndustryUpgrading Roadmap

30% value added; 15% employment

COORDINATIONMECHANISM

HORIZONTALMEASURES

VERTICALMEASURES


I I I . T H E 2 0 1 4 I P P : A N E W A P P R O A C H


A. Evidence based and Inclusive

Crafting the 2014 IPP began in the latter part of 2013 with the traditional inter- agency consultations which surfaced official views of the different government agencies. The BOI also collated and analyzed data on the different sectors of the IPP over the past five years to evaluate the economic impact of the incentives provided. Indicators included the actual investments generated, the jobs created, and government revenues from the projects. The result of these internal studies and assessment were later on presented in the cluster consultations to stimulate discussions and gather feedback.

An internal team was created to review all government development plans, industry roadmaps and studies, as well as relevant empirical work on investment incentives to ensure alignment and harmonization.

The evaluation process was prepared and subjected to several “peer review” sessions with a core group of the country’s prominent economists. Extensive consultations were likewise conducted with government agencies, the private sector and civil society through a series of consultative workshops in the national capital and key regional centers in the three main island groupings of the country. The evaluation process, along with its annexes such as the roadmaps, was posted in the BOI website to elicit more feedback and comments from the public. By far, this method has been the most inclusive and participatory exercise ever conducted for the IPP. Shown in Figure 3 is an illustration of the IPP process.

B. Objectives and Strategy

The 2014 IPP reinforces the PDP’s focus on inclusive growth by setting specific objectives meant to optimize the impact of incentives in attracting investments and generating employment opportunities. These are:

1. Increase employment opportunities by revitalizing growth sectors, especially the manufacturing sector;

2. Promote higher value adding activities and deeper MSME integration in the supply chains;

3. Strengthen participation in global and regional production networks including the ASEAN Economic Community.

To attain these objectives, the IPP will employ the following key strategies:

1. Support activities that generate high employment, encourage inclusive business practices and foster stronger intra- and inter-industry linkages;

2. Raise productivity by upgrading technology and developing industry clusters;

3. Identify and develop market niches to enable participation in the global and regional production networks.

C. The Evaluation Process

Under Chapter 3 of the PDP, “Competitive and Innovative Industry and Services Sectors” the following areas are identified for promotion in the medium-term: 1) Agro-industry; 2) Manufacturing; 3) IT-BPM; Logistics; 4) Tourism; and, 5) Construction.

Focusing on this list, the first step of this process determines if a particular economic sector or activity meets certain criteria that are consistent with the IPP’s stated objectives. This set of criteria helps assess the potential of the industry, sector or activity to generate the following:

1. Employment contribution. Labor intensity of an activity measured by its employment multiplier (see Appendices 2 [A2-2] and 3) and its contribution to the total employment.

2. Move up the value chain. Potential to move up the global value chain and whether the activity presents a latent comparative advantage (see Appendix 2).

3. Create spill-over effects. Impact on output of other sectors measured by output multiplier (see Appendix 3).


UPDATED PDP • 2011-2016

*Regional multi-sectoral consultations in Metro Manila, Cebu, Davao and Baguio City; Sectoral/Cluster consultations for manufacturing, agriculture/fishery, sevices, and infrastructure/energy.

IPP Frameworkand List ofPreferredActivities

Intra & Inter- Agency

Consultations

BoardApproval

Approval bythe President

Multi-SectoralConsultations*

Figure 3. Process of Formulating the 2014 IPP

Sectoral Development Plans Industry Roadmaps

Other SectoralStudies andResearches

On-line Consultation

Peer Review by a Core Group of Economists


4. Create competition which is important to ensure that promotion of the activity would not impair competitive outcomes in both input and output markets.

Note that the analysis takes the geographic context into account by defining markets based on products (good or service being produced) and geographic areas (location of producers and consumers).

Once the economic sector or activity meets the set of criteria provided, the next step is to determine if there are gaps in the industry’s supply or value chain (upstream, midstream or downstream) that prevent or hinder the industry from growing or moving up the value chain. The identification of gaps in the industry supply or value chain guides the government and the private sector in designing more focused and targeted interventions.

The third step in the evaluation process is to determine the obstacles preventing firms from investing in the potential areas and upgrading the quality of their products such as barriers or most difficult challenges that may be discouraging firms from moving up the value chain. Based on research and the industry roadmaps, the different constraints are listed below.

1. High production cost, power, logistics infrastructure

2. Lack of raw materials or suppliers of intermediate inputs

3. Lack of scale economies4. High risks for first movers especially for

activities requiring large capital5. Government regulations: franchises, licenses,

smuggling (due to inefficient regulation)6. Others: finance access, inability to comply with

international product standards and quality, lack of R&D, lack of skilled workers, lack of competition, etc.

The fourth step is to determine the policy mix that will help address challenges to the entry of new firms and move up the value chain and participate in regional production networks. These are grouped into two broad categories, namely:

1. Policy reforms, sound and reasonable regulations, and other non-fiscal interventions, and

2. Fiscal incentives with other non-fiscal interventions and support

The policy mix will consist of horizontal and vertical interventions as well as coordination mechanisms to allow firms and industries to increase their competitiveness, latch on to regional production networks, increase capacity to export and enable domestic firms (especially MSMEs) to grow and develop. Figure 4 shows an illustration of the evaluation process to identify the 2014 IPP list of preferred activities.

Introducing this new evaluation process brings rigor to the policymaking process for industry development and encourage more meaningful collaboration between the government and the private sector in formulating and executing sound policies and other interventions that would develop domestic industries, and prepare them for regional economic integration.

More important is the way the new approach improves the IPP formulation process and how the IPP is used and perceived by the stakeholders and the BOI. From just a list of economic activities that can be granted incentives by the BOI as incentives administrator, the new IPP is a strategic policy pronouncement of the government, contributing to the national development goals in the PDP, through a new industrial policy under the stewardship of the DTI-BOI.


FRAMEWORK FOR PRIORITIZATION OF ECONOMIC ACTIVITIES

INCENTIVES + OTHER POLICIES(WITHOUT INCENTIVES)

Figure 4. Evaluation Process

Y N HOW TO MAINTAINCOMPETITIVENESS

1. Employment contribution?H, M, L2. Potential to move up the value chain, Latent comparative advantage? H, M, L

3. Spill over e�ects and forward & backward linkages? H, M, L4. Create competitive market? H, M, L

A SUPPLY GAP?• UPSTREAM • MIDSTREAM • DOWNSTREAM • GEOGRAPHIC

POLICY RESPONSE

MOST BINDING CONTRAINTSPREVENTING ENTRY AND/OR

MOVING UP VALUE CHAIN

HIGH PRODUCTION COST • Power • Logistics • Raw Materials • Lack of scale

HIGH RISKS • Huge capital requirements • New technology

HUMAN CAPITAL • Skills gap • Labor mismatch

GOVERNMENTREGULATIONS • Licenses • Smuggling

GOVERNMENTPOLICIES • Tax • Labor • Foreign Equity Restriction

OTHERS • Financing • Competition • Standards, quality, etc.


I V . P R E F E R R E D A C T I V I T I E S O F I N V E S T M E N T S


Using the evaluation process discussed in the preceding section, the BOI reviewed all available national and sectoral development plans, industry roadmaps, sectoral studies and researches (see Appendix 4); and evaluated the comments and inputs from the various consultations, including a peer review with a core group of economists. Appendix 1 contains the sectoral analyses made by the BOI.

The following activities comprise the recommended list of preferred activities for investments under the 2014 Investment Priorities Plan:

I. Preferred List of Activities1. Manufacturing

a. Motor vehicles1 (excluding motorcycles, e-bikes and golfcarts) and motor vehicle parts and components:• Body panel stamping• Engines, transmissions, and transaxle• Large injection moulded parts• Bumpers; instrument panel; door

trims; center console; grill; wheel house finisher; lamps; shock absorber; wiper motor/blade; engine mounts; electric power steering; combination meter; instrument cluster; chassis & sub-frame; interior finishing; switches; seat mechanism; retractable seat belts; window regulator; constant velocity joints/transmission; aluminium radiators; plastic fuel tanks; fuel pumps; brake system and components; evaporators and condensers; relays; flame laminated automotive fabric; door & rear view mirrors; automotive glass; engine parts & assembly; and transmission parts & assembly

• Controller assembly, motor, and battery (other than lead acid) for electric vehicle

b. Shipbuilding including parts and components

c. Aerospace parts and components

1 Based on Logistics Efficiency Index

d. Chemicals• Oleo-chemicals• Petrochemicals and derivatives• Chlor-Alkali Plants

e. Virgin paper pulp f. Copper wires and copper wire rodsg. Basic iron and steel products, steel

grinding balls, long steel products (billets and reinforcing steel bars), and flat hot/cold-rolled products

h. Tool and Die• Simple, Compound and Progressive

Dies for metal stamping or metal forging

• Molds for die casting, for plastic injection or blow molding, glass blow molding, forging, encapsulation molds

• Jigs and fixtures for metal cutting and metal forging

2. Agribusiness and Fisherya. Commercial production2

• Coconut, corn, cassava, coffee, cocoa, fisheries, poultry and livestock;

• High value crops - rubber, spices, vegetables and fruits;

• Emerging commodities – sampaloc, jackfruit, peking duck, native pigs, siling labuyo, peanuts, monggo, and achuete.

b. Commercial processing2

• Extraction of higher value substances from agricultural and forest-based raw materials through bioprocessing;

• Conversion of agricultural and fishery products, their by-products and wastes, to a form ready for further processing or final consumption.

c. Production of animal and aqua feeds excluding those for game animals, fowls and other species for pet/leisure purposes2

d. Production of fertilizers and pesticides2

e. Modernization of sugar mills f. Mechanized agriculture support

services2, e.g. harvesting, plowing, and spraying/dusting

2 Subject to geographical supply considerations. In the case of poultry and livestock production, this is limited to areas in ARMM, Mindoro and Palawan.


g. Agriculture support infrastructures2, e.g. facilities for drying, cold chain storage, blast freezing, bulk handling and storage; packing houses, trading centers, ice plants in Less Developed Areas, AAA slaughterhouses, AAA dressing plants

3. Services a. Integrated Circuit Designb. CreativeIndustries/Knowledge-Based

Services3:• Animation • Software development4

• Game development• Health Information Management

Systemsc. Ship repair d. Charging stations for e-vehiclese. Maintenance, Repair and Overhaul

(MRO) of aircraftf. Industrial waste treatment

3 Covers start-ups of small newly incorporated domestic players/enterprises only.4 Covers only those with own Intellectual Property that are developed for commercial sale.

4. Economic and Low-cost Housing (horizontal and vertical)5

5. Hospitals6

6. Energya. Exploration and development of

energy sources (including energy crops or upstream biofuels)

b. Power generation plants7

c. Ancillary services

7. Public Infrastructure and Logisticsa. Airports and seaports (includes RO-

RO ports) for cargo and passengerb. Air, land and water transport (Limited

to brand new ships, aircrafts, seaplanes, RO-RO; buses, boats, mass rail - limited to capital equipment incentive only)

c. LNG Storage and Regasification Facility

d. Bulk water treatment and supply

5 Based on a price ceiling of Php3.0 million and subject to geographical considerations.6 Subject to geographical considerations.7 Subject to capacity installation gap based on DOE’s five-year supply-demand forecast or up to

2019, i.e., if forecast is 6000MW, then the first 6000MW capacity receives the incentives, and said installation gap will be divided among areas in Luzon, Visayas and Mindanao.


8. PPP Projects

II. Export Activities1. Production and manufacture of export

products2. Services Exports3. Activities in support of exporters

III. Special Laws1. Industrial Tree Plantation (P.D. 705)2. Mining (R.A. 7942) (limited to capital

equipment incentive)3. Publication or Printing of Books/Textbooks

(R.A. 8047)4. Refining, Storage, Marketing and

Distribution of Petroleum Products (R.A. 8479)

5. Rehabilitation, Self-Development and Self-Reliance of Persons with Disability (R.A. 7277)

6. Renewable Energy (R.A. 9513)7. Tourism (R.A. 9593)

IV. ARMM List

The ARMM List covers priority activities that have been identified by the Regional Board of Investments of the ARMM (RBOI-ARMM)

in accordance with E.O. No. 458. The RBOI-ARMM may also register and administer incentives to activities in this IPP for project locating in the ARMM.

A. EXPORT ACTIVITIES

1. Export Trader and Service Exporters 2. Support Activities for Exporters

B. AGRICULTURE, AGRIBUSINESS/AQUACULTURE & FISHERY

This covers the production of processed foods (production of “Halal” meat and foods), vegetable oils, food crops, integrated coconut processing and plantation, activated carbon, production of beverage crops and plantation, seaweeds production and processing, fruit processing, aquaculture (fish production and processing), young/sweet corn production, potato and sweet potato plantation/processing, cutflower production/processing, abaca plantation/processing, oil palm plantation/processing/refining and germinated oil palm seeds, feeds production, sugarcane plantation/processing and refineries, quality seeds


and seedlings of fruit trees and other planting materials propagated asexually or by tissue culture, pearl culture/processing, production of livestock and poultry that includes processing, crocodile farming and processing, sericulture, feeds production and production of plantation crops and other pharmaceuticals, medical herbs/essential oil plants, biomass, rubber, carrageenan, mangosteen and moringa.

C. BASIC INDUSTRIES

This covers the production of pharmaceuticals such as antibiotics and medical devices, textile and textile products, inorganic and organic fertilizers using solid waste materials, exploration and development of natural gas and mineral resources which includes small scale as defined under P. D. 1899 (but to exclude river beds in operations and processing of minerals such as beneficiation and other metallurgical methods) and cement

production of at least 1.0 million MTPY capacity (clinker based).

D. CONSUMER MANUFACTURES

This covers processing of rubber products to be integrated with plantation and leather products.

E. INFRASTRUCTURE AND SERVICES

This covers public utilities with developmental route of the five provinces and one city from ARMM and other adjacent cities and provinces such as common carriers, electric transmission/distribution, electric motor vehicles and its parts and components, water supply facilities/waterways and sewerage systems, buses/cargo trucks, other specialized mass transport systems, power generation like hydro power, geothermal and natural gas, and telecommunications with international gateways.

F. INDUSTRIAL SERVICE FACILITIES

This covers the following activities: common centers to include testing and quality control laboratories, training and demonstration centers, tool shops and similar facilities, metal casting, metal working, furniture, ceramics and food processing, petrochemical complex and industrial gases.

G. ENGINEERING INDUSTRIES

This covers engineering products, electronics and telecommunication products, fabrication of construction materials and hydro power plants.

H. LOGISTICS

This covers shipping of cargoes (air, sea and land) and forwarders.

I. BIMP – EAGA TRADE AND INVESTMENT ENTERPRISES

This covers enterprises located or have their base of operation in the BIMP –


EAGA, namely, Brunei; Sabah and Sarawak in Malaysia; Malusu, Sulawesi, Kalimantan and Iringaya in Indonesia; and Mindanao and Palawan in the Philippines, who shall invest and engage in economic activity in the ARMM including SMEs.

J. TOURISM

This covers the establishment of tourism estate subject to guidelines developed jointly by RBOI-ARMM and the Department of Tourism – ARMM, tourist accommodation facilities, tourist transport facilities and development of retirement villages which shall include health and medical facilities including amenities required by the Philippine Retirement Authority (PRA) and subject to the guidelines to be approved by RBOI-ARMM in consultation with the PRA, the Department of Health (DOH), the Regional Planning and Development Office (RPDO) and other concerned agencies.

K. HEALTH AND EDUCATION SERVICES AND FACILITIES

The ARMM has the lowest indication in the country regarding health and education as reflected in the Human Development Index. For this purpose, there is a need for incentives to be given to investors in the health and educational sectors such as putting – up of private hospitals, medical clinics, wellness centers, primary education, secondary education, tertiary education (colleges, universities and vocational - technical schools) and ancillary services including any and all health and education - related investments.

L. HALAL INDUSTRY

The MTPDP 2004 – 2010 provided that ARMM shall be the production and processing center for the Halal industry. ARMM being the only Muslim region in the country, has a comparative advantage in the Halal industry. Any Halal related business enterprises shall be covered. Halal refers to the permissible products and services under Islamic Law.


APPENDICES


1 . S E C T O R A L A N A L Y S I S


1. Manufacturing

The overall performance and contribution to economy of the manufacturing industry has been weak and declining for the past two decades of the Philippines. With its GDP declining from 26.3 percent to 23.7 percent and share to value added and employment performing the same from 28.2 percent to 23.7 percent and 11.3 percent to 9.1 percent, respectively, the manufacturing sector has failed to influence growth, employment and productivity of the country.

Nevertheless, the industry remains to be the most important sector for long-term productive employment, revenue and value-added generation and innovation. The manufacturing sector remains to be the largest sector of the country accounting 21 percent of the total GDP in 2010 and generating Php3.4 trillion in 2009.

Now, the manufacturing sector continues to exhibit growth rates above 9.5 percent since the first quarter of 2013 and accelerated growth in the fourth quarter with 12.3 percent compared to 5.5 percent a year ago. Manufacturing even grew faster than services reaching a full year growth of 10.5 percent, nearly double the 2012 growth of 5.4 percent.

The following subsectors contributed positively to the growth of the sector: Chemical and chemical products, which grew by 124.5 percent from 3.5 percent in the previous year; Furniture and fixtures, which rebounded to 72.8 percent from a decline of 3.8 percent; Radio, television and communication equipment and apparatus, 3.6 percent from 19.9 percent; Beverage industries, 4.5 percent from 2.7 percent; and Footwear and leather and leather products, 17.5 percent from 24.5 percent.

On the other hand, the following subsectors pulled down the growth of the sector: Wearing apparel, which plummeted 25.3 percent from 10.2 percent; Petroleum and other fuel products, which declined by 18.8 percent from a growth of 3.1 percent; Miscellaneous manufactures, dropped by 15.8 percent from 1.9 percent; Textile manufactures, further dropped by 20.4 percent from negative 6.9

percent; and Electrical machinery and apparatus, declined further to 15.0 percent from negative 13.5 percent.

Based on the studies of The Manufacturing Institute (TMI), the manufacturing sector has a multiplier effect of 1.4. For every liter of paint produced, it required a range of raw chemicals, raw materials, packaging like metal or plastic containers, printed paper labels, delivery trucks, it required capital equipment that grinds, blends filters and stores the product. It employed chemists in laboratories, engineers and operators to run and maintain the plant. It requires utilities like electricity and water. It requires “services” such as financial, marketing, sales and logistics services. Manufacturing is called the engine of the economy. Many services exist because of manufacturing; and many service jobs will disappear if manufacturing disappears1.

Thus, the revival of the manufacturing industry could highly contribute in the attainment of the commitment of the President to the Filipino people to pursue economic growth and generate more employment. It is for this reason that for 2014-2016, the government has declared the Manufacturing Resurgence Program as a flagship program. The manufacturing industry roadmap crafted by the Philippine Institute for Development Studies (PIDS) would be its main blueprint.

a. Automotive (Motor Vehicle Assembly and Parts Manufacturing)

The motor vehicle industry represents a significant portion of the global economic activity with extensive upstream and downstream linkages to many diverse industries and sectors. The employment, skills, and export potentials associated with car production are enormous. The fact is, the top 20 industrial economies in the world are also the top 20 auto producers; lending credence to the fact that no country has ever become a developed industrial economy without an auto industry; from Japan, to the United Kingdom, to China not even the United States.

1 Based from an article of Mr. Bobby Batungbacal, Director, Federation of Philippine Industries, Inc., entitled, “The Strategic Importance of the Philippine Manufacturing Sector” dated October 6, 2011.


In 2013, it posted a 16 percent increase in the total number of four-wheel vehicles sold, that is, from 182,779 units in 2012 to 212,414 units sold in 2013. The Philippine automotive manufacturing sector, particularly car manufacturing, has an annual capacity of 200,000 units. Unfortunately, these facilities are highly underutilized at 36 percent. The growing preference for CBUs, importation of used cars, and smuggling of vehicles have all factored in the decline of local production.

There are a total of four (4) car manufacturers currently operating in the Philippines – Toyota Motor Philippines Corp. (TMPC), Mitsubishi Motor Philippines Corp. (MMPC), Honda Cars Philippines Inc. (HCPI), and Nissan Motor Philippines Inc. (NMPI). Ford Motor Company Philippines (FMCP) used to manufacture vehicles in Santa Rosa, Laguna until December 2012. FMCP closed its Philippine assembly citing low production volume and lack of supply base as the main reason of its closure.

Aside from car manufacturers, there are 14 firms producing commercial vehicles such as light trucks, trucks, and buses. MAN Automotive Concessionaires Corp., Pilipinas Hino, and Universal Motors Corp. (Nissan Diesel) dominate the truck and bus categories while others focus more on the production of light trucks.

The presence of these automotive manufacturers in the Philippines gave birth to some 272 original equipment manufacturers (OEM) supplying more than 300 parts and component requirements of local automotive manufacturers. Some of these parts and components, e.g., transmissions, wiring harness, among others, are also exported.

In the case of electric vehicles (e-vehicles), the market is just starting to develop in the country. There are already a few that have

registered with the BOI to assemble e-trikes in anticipation of the implementation of the Asian Development Bank (ADB) program for the supply of e-trikes to several local governments.

Employment and Export Performance

The automotive and auto parts manufacturing provides stable wages and working conditions even across a range of other industry sectors. In the Philippines, the industry employs 8,000 in the auto manufacturing and 60,000 in the auto parts manufacturing. Careers are also often long-lived; workers are employed for an average of 20 or 30 years. In addition, the industry employs around 340,000 in the auto-supporting industries.

The auto parts industry has also generated exports for the country, thus making it a foreign currency earner. In 2013, the industry’s export reached $3.3B which alone is already 0.5 percent of the country’s gross domestic product.

There is still no local production of e-vehicles in the country.

Latent Comparative Advantage and Potential to Move up the Value Chain

The supply network of the automotive industry is characterized by a tiered structure. The OEM is supported by a small number of first tier suppliers which are also supported by other suppliers. Tier 1, which is mostly large firms, is surrounded by lower tier suppliers. Tier 2 firms may be large or small and medium enterprises (SMEs) supplying parts, components and other inputs to the next higher-tier suppliers. Tier 3 firms are at the lower-end of the value chain and are predominantly SMEs performing low-skill, low value added activities and manufacturing relatively simple products. Higher level tiers 1 and 2 are characterized by greater skill, technology, knowledge, innovative and value adding and creation activity as well as pricing


power and brand presence. Lower tiers 2 and 3 are characterized by lower skill, technology, innovative and value adding activity and the need to compete on cost. The activities of tiers 3 and 4 are considered as relatively simple and require unskilled labor and standardized low level of technology (Abonyi 2005).

The auto parts potential to move up the value chain is also high, considering the capability of existing players and high trainability of Filipino workers and that there are 30,000 parts in every vehicle, and currently there are 256 parts manufacturers producing only over 300 parts and components made of metals, plastic, rubber and composite materials for both the original equipment manufacturer (OEM) and replacement market.

Considering the current sentiment on sustainable development and fearful of the climate change effects, the government has made e-vehicles part of the priorities. Further, the Electric Vehicle Association of the Philippines (EVAP) has formulated its roadmap that would see the Philippines as a significant player in the global production of e-vehicles.

Spillover Effects

Of the 256 parts manufacturers, 124 are considered first-tier manufacturers while the remaining 132 are mostly small and medium enterprises that act as sub-contractors and serve as second- and third tier suppliers. Tier 1 suppliers are multinational affiliations while Tiers 2 and 3 suppliers are mostly 100 percent Filipino owned companies.

Tier 1 suppliers are large firms with capitalization of more than Php100 million and account for about 7 percent of the industry. They are mostly suppliers from Japan brought in by assemblers forming part of their vertically integrated operations. For example, Toyota Motor Philippines is supported by large first tier

enterprises such as Aichi Forging metal/casting/forging), Fujitsu Ten (audio/electronics), Philippine Auto Components (electrical/meters), Technol Eight (metal parts), Tokai Rica Philippines (electrical/mechanical parts), Toyota Autoparts Philippines (transmission), and Toyota Boshoku Philippines (interiors/seat assembly).

Tiers 2 and 3 suppliers, on the other hand, form the bulk of the industry mostly composed of small firms with capitalization of Php5 million and below. Most of them operate as mom and pop style suppliers with varying capabilities and some real quality problems. These firms failed to develop as they have insufficient capital and technology that are necessary to improve their products. They comprise the major players of the industry and are the same companies manufacturing parts for OEM car assemblers and engaged in exporting activities. The major players in the automotive components manufacturing sector are Yazaki-Torres Manufacturing Corp. and United Technologies Automotive Phils. (wiring harness); Temic Automotive (Phils.), Inc. (anti-brake lock system); Honda Parts, Asian Transmission Corp. and Toyota Autoparts Phils. (automotive transmission), Fujitsu Ten Corp. of the Phils. (car stereos) and Aichi Forging Co., Inc. (forged parts). These companies are manufacturers of wiring harness; transmission; alloy wheels; radiator, leaf spring, and stamp parts; tires; and auto rubber parts. Almost 60 percent of all parts manufacturers produce OEM parts while the remaining 40 percent caters to the replacement market.

The automotive industry generate skills base, comprising of mechanical, process and materials engineering, foundry engineering, fluid mechanics, CAD/CAM designers, welders and fitters & turners, alongside specializations in chassis systems and lubrication products. There are also significant spillover effects of this skills base into critical elements of the mining, aerospace and possibly the defense sectors.


Supply Chain Gaps/Binding Constraints

As mentioned earlier, there is lack of locally manufactured parts and components and other support activities. Of the 30,000 parts to make a car, only 300 are currently produced in the country.

Further, there is lack of scale in the production by the car assemblers that lead to a cost handicap relative to the ASEAN competitors like Thailand and Indonesia. This could be attributed to high logistics cost in the importation of the large parts, particularly, the body shell and other large plastic moulded parts.

The establishment of stamping facilities to make these large parts require high capital investments, and thus, production volumes would have to be increased to make it a sound investment.

At present, there is a relatively small domestic market for the local producers. The concern on market size is further aggravated by the cases of smuggling and cheaper imports from ASEAN and China.

In the case of e-vehicles, the binding constraint is in the absence of batteries for such vehicles, i.e., batteries other than lead acid batteries, as well as control assembly. It is noted that e-vehicle batteries (e.g., lithium-ion batteries) accounts for 40-50 percent of the cost of the vehicle.

Policy Response

To address the above supply chain gaps and binding constraints, the following interventions have been identified:

· Provision of incentives to investments in assembly operations with stamping facilities and production of critical parts and components;

· Provision of R&D support to the parts and components manufacturers;

· Demand stimulation measures such as refleeting of government vehicles, facilitation of franchising procedures, and strict implementation of the ban on used cars importation.

It may be noted that the Metals Industry Research and Development Council (MIRDC) of the Department of Science and Technology (DOST) has approved funding for a testing facility for automotive parts and components in its compound.

b. Motorcycle

The motorcycle industry covers the manufacture and assembly of motorcycles and its parts and accessories. For the year 2010, the motorcycle industry contributed Php8.2 billion worth of value-added. In the same year, the industry produced around 1.052 million motorcycles, making the Philippines no. 8 in the world’s motorcycle production, overtaking Japan, and 4th in ASEAN, surpassing Malaysia.

There are five motorcycle companies that are members of the Motorcycle Development Program Participants Association (MDPPA) and thirteen members of the Chamber of Assemblers & Manufacturers of Motorcycles in the Philippines (CHAMMP) all of which are registered participants of the Motor Vehicle Development Program (MVDP).

The Philippines’ motorcycle density for 2011, i.e., the ratio of number of people for every motorcycle, is 24:1. Untapped domestic market presents a healthy picture for the industry. Even after saturation, Filipinos will continue to use motorcycles in various travel needs and livelihood.


Employment

The motorcycle manufacturing industry employs around 5,000 personnel, and generates 3,000 additional jobs for its support/allied sectors.

Supply Chain Gap/Binding Constraints

The motorcycle industry’s upstream sectors include iron and steel, the metalworking industries, such as metalcasting and tool and die, rubber, petrochemical and electrical industries. Its downstream industries include the dealerships networks and distributors around the country.

The most binding constraints preventing entry and/or moving up value chain of the industry are as follows:

· Underdeveloped local parts manufacturing sector;

· Short model life cycle;· Lack of testing facilities;· Smuggling and proliferation of counterfeit

motorcycles and parts.

The steady rise in production of motorcycles has led to increased demand for parts and components. However, the industry has a very low localization rate. The local parts and component industry has not been able to capitalize on this demand increase and has been highly dependent on imports for a variety of critical parts and components. The local parts manufacturing on the other hand has been hesitant to invest because of the short model life cycle, in short, any investment must be recovered within 3 years before the model is phased out of the market thereby making their components uncompetitive in terms of price.

Spillover Effects

The motorcycle industry, like the automotive industry, also generates skills base in areas of mechanical, process & materials engineering,

foundry engineering, fluid mechanics, CAD/CAM designers, welders, fitters & turners and lubrication products. Upstream from the motorcycle manufacturing there also lies a network of direct and indirect suppliers. There are the motorcycle supporting industries that include machinery and equipment, dies and moulds, metal stamping and die casting and machining. Parts and components manufacturing also has a place in the supply chain feeding motorcycle manufacturing, as first, second or third tier suppliers. Thus, the spillover effects of the motorcycle industry, like the automotive industry is also high.

The domestic market presents a healthy picture for the industry, such that the current Philippine possession ratio of 24:1 is an appealing factor to the industry compared to other ASEAN countries where the density of motorcycles per person is near the saturation point. The situation offers tremendous growth potential in the near future.

Policy Response

The domestic market presents a huge potential for growth with motorcycle density still far from our ASEAN neighboring countries. It is therefore important to equip the industry to capitalize on the opportunities, as well as face the changes and challenges in a liberalized and open market environment. This is where the government can step in and provide the boost to the industry to increase their competitive edge, especially in the motorcycle parts manufacturing.

The following have been identified as possible interventions for the industry:

· Provision of fiscal incentives to develop critical parts manufacturing and allied industries such tool and die, injection molding facilities;

· Establishment of testing facilities;· Strict enforcement of customs and IP laws.


c. Electronics

The Philippine electronics industry began in the mid-seventies when industrialized nations relocated their production facilities to third world countries in order to control the escalating cost of production. The Philippines was an ideal relocation site due to its cost competitive, highly-educated and English-speaking labor. Other factors included the country’s geographical location (being at the crossroads of international trade), and attractive government incentives. The conditions that encouraged foreign electronics companies to turn to the Philippines have remained and have been further enhanced by the country’s political transition to popular democracy in 1986. Since then, the industry has grown rapidly and overtook agriculture as the leading export earning industry in 1996.


The Philippine electronics industry remains to be the major contributor to the economy, accounting still for 40 percent of total exports in 2013.

As of December 2013, in terms of employment, the sector directly employs around 273,000 and contributes around 1.91 million indirect employment.


Semiconductor Manufacturing Services (SMS) account for 77 percent of all electronics exports, but include only back-end testing and assembly as the country does not have manufacturing capability for semiconductor wafer fabrication. The remaining 22 percent is comprised of Electronics Manufacturing Services (EMS). According to SEIPI, industry trends identify several EMS subsectors with high growth potential: Medical/Industrial Instrumentation, Automotives, Consumer Electronics and Office Equipment. Similarly, the Philippines

is the traditional top choice worldwide for Test and Assembly operations, but value-adding does not come from these operations, and instead derives from semiconductor research and chip design processes.

Sales from semiconductors will continue to be on a downward slide, as these are mainly legacy products with declining profit margins that are dependent on the industry’s fast turnover trend of cheaper and increasingly more efficient products (similar to how the price of USB flash drives has gone down while memory capacities have doubled). This means that the Philippines will definitely have to focus more on the electronics side to remain competitive for the long term.

To this end, SEIPI, with the support of BOI, is currently in the process of securing funding for its proposed industry think tank project, entitled “Product and Technology Holistic Strategy (PATHS)”, which aims to identify product niches and an overarching long-term industry strategy for the Philippine electronics sector over the next 5 to 10 years.

Spillover Effects

The Electronics industry has the highest global value chain (GVC) participation rate, with a share in foreign value added in trade of all exports at 45 percent. This is because the products of this industry can be broken down into discrete components that can be separately produced, easily transported and assembled in low-cost locations.


Based on the current structure of the industry, the identified supply chain gaps include IC design, wafer fabrication and R&D in the upstream section and no manufacturing diversification in the downstream. Constraining the development of the upstream and downstream activities are the lack of highly-skilled workforce, high power costs, lack of


technology and product innovation, financing, and SME product development initiatives.

Policy Response

To address the above constraints, the Philippine Council for Industry, Energy and Emerging Technology Research and Development (PCIEERD) of the DOST approved funding for the establishment of the following facilities:

· Advanced Device and Materials Testing Laboratory (ADMATEL);

· Electronics Product Development Center (EPDC); and

· Philippine Institute for Integrated Circuits (PIIC).

In addition, the government will develop SME localization programs (“Big Brother- Little Brother”) to further enhance the participation of SMEs in the value chain.

Other interventions include human resource development, reducing the cost of doing business in the country (taxes, energy cost, logistics cost, etc.), and investment promotion.

d. Chemicals, Petrochemicals, and Oleo-chemicals

The chemical industry is considered as one of the pillar industries in any economy as it supports all sectors of the economy, namely: agriculture, services, and manufacturing. The various chemical sub-sectors include petrochemicals, oleo-chemicals, coatings and inks, adhesives, plastics, fertilizers, cosmetics and personal care, soap and detergent.


Based on the Labor Force Survey (LFS) conducted by the Bureau of Labor and Employment Statistics (BLES), the chemical industry employs a total of 176,000 employees as of July 2013. The Samahan sa Pilipinas ng mga Industriyang Kimika (SPIK)

provided industry estimates on the number of direct workers for the following sub-sectors: petrochemicals–3,000 direct workers; oleo-chemicals–3,000 direct employees; and the chlor-alkali sector–600 direct employees. However, industries which use their products employ huge numbers of employees (food processing, healthcare, electronics, transport and energy, construction and automotive).

The Philippine Chemical export performance has been increasing. Based on the industry’s export performance from 2009 to 2013, exports grew by 167.80 percent from US$969 Million in 2009 to US$2.595 billion in 2013. However, the industry is still a net importer of chemical products with a value of US$5.1 billion imports compared to the export value of US$2.3 billion, both as of October 2013.


There is a high potential for the industry to move up the value chain given that it shall make use of the latest available technology in their operations. As an example, the expansion in chlor-alkali production capacity would be making use of the latest available technology called the Ion Exchange Membrane (IEM) which will give more efficient and cleaner processing. The first naphtha cracker plant in the Philippines has been constructed and will commence commercial operations in August 2014. The said naphtha cracker will be the base producer of the raw materials to be used as feedstock by the midstream petrochemical polymerization plants. Further, one of the country’s vital assets, the coconut, serves as the major input for oleo-chemicals, i.e., cocochemicals, which are recognized as natural and sustainable.

Spillover Effects

A wide window of opportunities exists for the domestic chemical industry market as it exhibits strong linkages to industries such


as agriculture, agribusiness and fishery, housing, cement, pharmaceuticals, and creative industries. Petrochemical products may be used in construction, electronics, transportation, telecommunications, agriculture, packaging, and furniture. Chlor-alkali, which is an input for petrochemicals, may also be used in water treatment, batteries, agrochemicals, electroplating and galvanizing, and pharmaceuticals. Lastly, oleo-chemicals, which are derived from coconut oil, can be used in everyday products such as soap, cosmetics, pharmaceuticals, detergents, and food products. The development of the Philippine chemical industry would give support to the roadmaps of the plastics, automotives, electronics, and copper industry roadmaps, among others.


The nature of the industry that covers the upstream, midstream, and downstream sectors makes the network of the different sectors an interactive partnership and competition in itself.

The petrochemical industry is a strategic industry in an economy. In most countries, the development of the petrochemical industry is primarily hinged first on supplying the domestic market resin requirements and subsequently, expanding capacity to cover export market to further achieve economies of scale.

Based on the Philippine Chemical Master Plan, the industry emphasized the importance of the full integration of the petrochemical industry which includes the expansion of naphtha production and diversification of petrochemical products, so as to help in achieving inclusive growth and sustainable socio-economic development. The need for the petrochemical industry integration is seen vital as there are gaps in the supply value chain that needs to be filled in.

The midstream petrochemical industry has 7 major players which provide the needs of its downstream plastics industry consisting of more than 100 players. Due to the insufficient supply of raw materials, the downstream industry is forced to import its requirement. Therefore, a supply chain gap in the midstream petrochemical exists; and this will be partly addressed by the Naphtha Cracker as it will produce the raw materials ethylene and propylene, to produce PE and PP. Other than PE and PP, an expanded PVC production is needed to meet domestic demand. The size of a PVC expansion necessitates an economical supply of chlorine from a chlor-alkali plant.

In addition, the Philippines is currently confined to only one component of the oleo-chemical value chain, which is an ingredient manufacturing. But the entire value chain is quite long, comprising of feedstock production, ingredient manufacturing, compounding and formulation, branding and packaging, logistics and distribution, retail or direct marketing.

Policy Response

Having stable operations of the domestic petrochemical facilities, leading to a steady supply of ethylene, propylene, PE and PP materials, will help develop local olefins and polyolefins demand and as such may lead to an increased market size for the said products. This creates the environment for having the current facilities undergo further capacity expansions, for which the granting of investment benefits will play an important role in ensuring the sustainability of the industry’s operations.

It is a known fact that chemical plant facilities are highly capital intensive and usually require foreign technologies. Thus, it is not uncommon that foreign investors are highly encouraged by governments to participate/invest on these projects considering the huge capital investments required.


Other than incentives, there should be research & development (R&D) support given to the industry in order to be innovative, both in its products and processes. Further, product innovation and technological advancements should be supported by strong knowledge-based workers in the sciences. R&D support should then be supplemented with skill training programs for chemists, scientists and engineers who shall mobilize the industry.

Technical smuggling shall be addressed through the strict and proper implementation of customs laws. Lastly, investing in the construction of power plants and logistics infrastructure should also be considered to address the concerns of high power costs and availability, as well as logistics costs.

e. Shipbuilding and Ship repair

For the year ending 2013, the Philippines regained its position as the 4th largest shipbuilding nation of the world in terms of gross tonnage, with just a 0.3 percent edge over Brazil.It is thus noteworthy that more shipyards in the country are building more ships of higher tons such as bulk carriers, container ships and passenger ferries. Investments in shipbuilding facilities are seen to benefit the food manufacturing, tourism, transportation, oil and steel industries.


One of the major contributions of the sector is its employment generation. At present, the sector employs 45,038 Filipino workers, 70 percent of whom belong to the skilled and semi-skilled category. Hanjin Philippines alone employs 25,000 workers. Enhancing investments in the ship building and ship repair sector (SBSR) will surely generate additional jobs for Filipinos. Based on the Input-Output (I-O) Analysis2, the sector has a simple global employment multiplier of 395. This means that

2Input-Output Analysis was prepared by the COMPETE Project and Center for Research and Communica-tion (CRC) with funding from the United States Agency for International Cooperation (USAID)

a one-billion peso investment in the sector can potentially generate 395 jobs across the various industries.

The sector has also generated exports for the country, thus making it a foreign currency earner. In 2012, the sector’s export receipts reached US$1.07 billion, which was already 0.7 percent of the country’s gross domestic product.


A latent strength of the sector which still needs to be fully taken advantage of is the country’s strategic location to the shipping routes of oceangoing ships serving the Asia-Pacific region. Such strategic location could be translated into the country becoming a hub for ship repair and dry-docking of oceangoing ships, including fishing vessels operating in international waters. For this latent strength to be realized, the country’s shipyards would need to be capable and competitive with neighbouring foreign shipyards, in servicing the dry-docking/repair requirements of oceangoing ships.

Ship building, being a heavy industry with high degree of technology immersion, offers an opportunity for foreign collaboration. According to the Nomura study entitled “Accelerating Foreign Direct Investments (FDIs) in the Philippines’ Shipbuilding Industry,” Japan seems to be the most promising to the Philippines in attracting FDIs in the SBSR sector, followed by Korea. The study further indicates that Japan, China and Korea are potential markets for investments in shipbuilding. At present, the Philippines hosts some of the world’s biggest players in shipbuilding such as Japan’s Tsuneishi with its Cebu facility now its second largest shipyard.

A more concrete strength of the sector is the readily available cheap and easily trainable technical and skilled manpower for shipbuilding and ship repair works in the country. Many


Filipino workers have inherent skills for shipyard-related jobs like welding, pipe fitting, moulding, etc., including technical/engineering competence. With comprehensive training programs, a pool of skilled shipyard manpower would easily become a basic asset of the sector, not only for local shipyard requirements but also for foreign-based shipyards.

Spillover Effects

The local industry has the potential to develop 18 backward linkage industries which may include ship out-fittings, safety accessories, marine lighting, maritime signs, symbol and posters, switch gear, furniture, marine cables, anchor and chain, electrical and electronic items and shipbuilding steel plates.

In addition, the shipyards could also provide ship repair services to the local shipping industry and serve as an alternative ship repair hub to Singapore in the ASEAN region.


At present, virtually all raw materials, ranging from engines to steel, electronics, furnishings, cabling, piping and washbasins are imported. Thus, investments in parts and components as mentioned above would be most beneficial to the economy.

Further, it is very seldom that a Filipino shipping firm orders a brand-new vessel. Ship operators choose to import second-hand ships from Japan, South Korea, and Europe Thus, there is low domestic demand that likewise result in small and outdated shipyards.

Policy Response

To ensure that the Philippines remains as a major player in the SBSR sector, it is necessary that investments are encouraged in the local parts manufacturing and other support industries as well as ensure that the country’s regulatory environment remains competitive with other ship building countries.

Noting the country’s current small market due to the preference of ship operators to import second-hand ships from Japan, South Korea, and more recently from Europe, it is advised that the provision on vessel retirement under the Domestic Shipping Act be implemented by the Maritime Industry Authority (MARINA).

Other possible support to the industry include investment promotion activities to forge joint-ventures, partnerships or tie-ups with foreign shipyards to address concerns on capitalization and access to more advanced technology and modern facilities.

f. Aerospace

The Philippines has the potential to be a center for manufacturing for the global aerospace and aviation industry. According to the industry, the next two decades could see the country becoming a manufacturing hub of aerospace and aviation parts and components in the ASEAN region, generating jobs that will surely upgrade the capabilities of local labor to advanced stages of competence in varying degrees. In 2013, the aerospace industry accounted for 0.15 percent of the estimated US$257 billion GDP.

The aerospace industry projects a double phased growth over the next five years.


The aerospace industry directly employs 2,200 personnel in 2013. With government help, the industry projects to employ about 14,932 personnel by 2022.

In 2013, aerospace parts exports amounted to US$385 million. The industry projects to export about US$2.57 billion worth of parts by 2022 if the roadmap recommendations would be followed. It should be noted that the local aerospace industry is a net export industry, with 99 percent of industrial output manufactured for export.



Currently, there are three principal Tier 1 International Suppliers/Original Equipment Manufacturers (OEMs) in the Philippines: Moog Controls Corp., which manufactures flight control actuation systems, B/E Aerospace, which specializes in aircraft galley and equipment manufacture, and JAMCO, which manufactures airframes and sub-assemblies. These major OEMs subcontract some of the processes to Tier 2 and Tier 3 suppliers in the Philippines. Thus, there is the potential to move up the value chain and secure the chance to supply more of the critical aircraft parts and components. A complete supply chain will potentially attract more principal Tier 1 manufacturers to locate in the country, which can have spillover effects as their demands can create more subcontracts to local Tier 2 and 3 suppliers.

Young, relatively cost-competitive, English-proficient, highly-trainable and fairly knowledgeable manpower has been the comparative advantage of the Philippines, which is supported by a chain of aerospace and aviation schools.

Spillover Effects

An aircraft requires thousands of spare parts which provide large opportunities for OEMs, their Tier 1, 2 and 3 suppliers, plus the MRO companies. The manufacturing industry for aerospace is fast gaining momentum, bringing with it related industries in the supply chain as well as other backward and forward linkages of industries. These include: tool and die, metalworking, chemicals, plastic, rubber, electronics, logistics, and tourism. Promoting the aerospace parts and components manufacturing industry will generate more economic activities by increased outsourcing of manufacturing to more of our local SME subcontractors and suppliers of our principal OEM locators.

Further, the aerospace sector, being an export-oriented industry, is densely located in industrial areas and export zones such as Laguna/Batangas, Baguio, Bulacan and Metro Manila. Thus, employment generation and skills development would likewise have geographical spillovers in nearby areas.


Industry challenges limit its full capabilities into machining, assembly, production and delivery. The country’s major players in Tier 1, i.e., Moog Inc., B/E Aerospace and JAMCO, are mainly involved in said processes with some companies in Tier 2.

Also, raw materials are imported because aerospace parts manufacturing is a highly standards-dependent industry. United States, Canada, United Kingdom, Singapore and some European countries are the main sources of raw materials for aerospace manufacturing. Raw material gap in the value chain goes with inadequacy in terms of special processing, chemical / metallurgical testing and fine machining. Though some of the Tier 1 players have the capabilities on some of those processes, firms still resort to outsourcing these processes from Singaporean companies.

In terms of production and process capability, the following are the identified gaps:

· High-end machine tools and metrology equipment;

· Fine Machining (hone, fit , lap, extrude, hone, deburr equipment);

· Heat treat, surface treatment process;· Gear manufacturing;· Non-destructive inspection (NDI) and

plating/metallurgical;· General functional testing for compliance

to aerospace requirements;· Chemical test / solution test compliance to

aerospace requirements.


Likewise, accreditation for potential entrants to the aerospace industry is said to be expensive, tedious and time-consuming. Standards for aerospace parts manufacturing is high because of the demands for safety. Tier 1 companies and their suppliers and subcontractors must comply with certain aerospace standards (such as AS9100 or NADCAP) to be able to supply to Boeing or Airbus for instance.

Policy Response

There should be a focus on the build-up of the aerospace supply chain through the promotion of productive partnerships between buyers and suppliers, the enhancement of the business environment and the improvement of the technical base capability through manpower education and training, and technology systems upgrading.

Recognizing that integrating the aerospace supply chain locally can reduce costs by 19 percent, trade facilitation/integration of the supply chain should be encouraged for these components:

· Raw material supply/distribution (MIL/AMS Specifications);

· Transport and import / export turn-around;· Completion of process capability in the

supply chain;· Tooling and chemical supply distribution.

Likewise, investments should also be encouraged in aerospace parts and components manufacturing to attract the other major Tier 1/OEMs to locate in the Philippines that would ultimately increase manufacturing opportunities for our local metals and engineering industries.

Partnership between industry and the government, particularly the MIRDC-DOST would be enhanced through support programs

on process capability building, supply chain integration, and training & education. The MIRDC can provide training programs and certifications on industry accreditation for Aerospace Standards (AS 9100, NADCAP) to Tier 1, 2 and 3 supplier companies.

Further, policies that support trade facilitation for imported raw materials and processes, and improvement of logistics efficiency to reduce cost and import and export lead times would also be considered.

g. Copper Industry

The copper industry is a disjointed industry, local productions of copper concentrates and cathodes are being exported while domestic requirements for concentrates, cathodes and rods are being imported. There is minimal or no linkage between industry players.

The output of the Philippine copper mines today is less than 25 percent of what it was in the 1970’s, coming from just four mining projects with deposits that are about to be exhausted. At 250,000 metric tons per year, this is not enough to supply the annual concentrate requirement for smelting, which is about 720,000 MT under the existing full capacity cathode production. All the concentrate output is exported by mining companies. The sole smelting plant, Philippine Associated Smelting and Refining Corp. (PASAR), buys all its copper concentrate requirements abroad and also exports almost all of its copper cathode produce abroad. Only a minimal quantity goes to the domestic rod production for the use of less than a handful of wire and cable manufacturers on an intermittent basis. The rest of the establishments in the wire and cable industry source their copper wire rod requirements abroad and essentially sell to the domestic market, with only one exception.



The mining industry supplies roughly 250,000 metric tons (MT) of concentrates annually, but all of these go to foreign markets as there is no local demand for copper concentrates at this time. There is potential demand from PASAR, but only when concentrate output increases substantially giving some comfort on the supply reliability to the cathode producer. Locally-produced copper cathodes are also nearly 100 percent exported.

Moreover, at least 90 percent of the output of the local wire and cable producers goes to the domestic market, while 10 percent are exported, mostly to Taiwan and Korea (sold mainly to the companies’ subsidiaries in these countries). The domestic market, in turn, is about 60 percent supplied by local producers and 40 percent by imports including possibly smuggled substandard products, according to industry sources. Capacity utilization among local producers averaged about 50-60 percent, indicating that existing capacity is sufficient to meet local demand over the medium-term. In 2011, export of copper products reached US$1.64 billion.

The 2009 Annual Survey of the Philippine Business and Industry (ASPBI) reported 3,700 employed in insulated wires and cables, with total compensation accounting for 4 percent of production cost. PASAR employs about 1,000 with annual salaries and wages representing 20 percent of total operating expenses.


The Philippines has significant deposits of copper, reputed to be among the biggest in the world. It also has a world class copper smelting plant. It has a thriving local wire and cable manufacturing, and exports automotive wiring harnesses and copper foil in significant

quantity out of its special economic zones. It used to operate copper wire rod casting plants commercially.

If the industry gaps would be connected, it is envisioned that the Philippines could produce and export more of the higher value added copper products that are used in the other industries such as electronics, construction, automotive, and chemicals, among others. A start in this endeavour is the establishment of a copper wire rod facility that would connect the copper concentrate production to the copper wire production.

Spillover Effects

The actual production of copper, its transformation and further processing of semi-finished products into components for end-user goods comprise the product segment of the industry. Copper’s final products are essentially inputs to the manufacture of end-user goods like cars, mobile phones, computers, valves, and electrical materials, among others. Currently, there are four (4) operating copper mines that are producing concentrates of about 250,000 MPTY.

As the full integration will not be about having a single entity performing most or all stages of processing, but more of an industry where one entity performs the crucial stage of processing and provides for the needs of others in the various stages of processing, there is a great opportunity to create spillover benefits across the industry. As integration happens from the upstream with the development of major copper mines to the midstream with the establishment of a copper rod casting facility and the downstream with the development of new copper products, cost competitiveness across all user industries would be enhanced, thereby, spurring further access to the local and regional/global supply chains.



The product segments of the copper industry can best be described by considering the industry’s supply chain which is divided into three main areas: (1) the actual production of copper, (2) its transformation and (3) further processing of semi-finished products into components for end-user goods. Copper’s final products are essentially intermediate products, entering as inputs in the manufacture of end-user goods like cars, mobile phones, computers, valves, electrical materials, etc.

As mentioned earlier, the copper industry is disjointed. The local production of copper concentrates and cathodes are being exported while domestic requirements for concentrates, cathodes and rods are being imported. Thus, there are several gaps to close in this industry. For starters, the government is looking at encouraging investments into the copper wire rod facility to link the copper concentrates to the copper wire production. The pre-feasibility study for the establishment for such a facility has already been completed.

For the upstream integration, this becomes physically viable if local supply of concentrates is sufficient and stable enough to meet the volume requirement of PASAR, which is 720,000 metric tons per year (MTPY) under existing smelting capacity (the company plans to expand its capacity shortly), more than twice the available domestic concentrates supply. The development of major copper mines like Tampakan, Far Southeast and Silangan will increase the potential for upstream integration. In order to support the development of a few large scale, efficient and sustainable copper mines, a rational mining policy and program is needed.

For the downstream integration, the objective is to have local production of 12,000 MTPY of copper rods by 2016. A pre-feasibility study on the establishment of a copper wire rod facility

has already been completed and indicated that such activity is profitable. Support is needed to promote investment in the copper wire rod-making facilities.

Policy Response

Based on the copper industry roadmap, to achieve integration of the industry, the priority focus is to: (1) support the development of a few large scale, efficient and sustainable copper mines; (2) immediate actions covering the downstream industry, as this is where value can be optimized and can achieve results relatively more quickly; and, specifically, (3) the re-building of the copper wire rod segment of the downstream industry, which is currently the missing link in the value chain and where the country used to have a brief success.

To this end, the following interventions have been identified:

· Develop a rational mining policy to develop world-class copper mines;

· Work on the integration of the copper industry by encouraging investments in the current industry gaps, e.g. conduct investment promotion activities for a copper wire rod facility;

· Encourage agglomeration of allied and related industries to reduce logistics cost and promote industry linkages. The development of a domestic manufacturing industrial zone in Leyte for copper industry cluster is recommended;

· Review tariffs on copper products to remove distortions. Raw materials are imposed Most Favored Nation (MFN) tariffs of 1-3% (cathodes: 1%), while copper wires, cables and all other finished products have zero tariffs under ASEAN Free Trade Area-Common Effective Preferential Tariff (AFTA-CEPT). Note that the imported raw materials for the local downstream copper industry mostly come from non-ASEAN countries, while most of the Philippine


imports of semi-finished copper products like rods and wires come from within the ASEAN sub-region.

h. Iron and Steel

The iron and steel industry plays a pivotal role in long term economic development because it provides key material inputs for the construction of roads, buildings, houses and factories as well as the manufacturing of automobiles, ships and electronics.

Sustained long-run economic growth will require growth in public spending for infrastructure and private construction spending, which will also undoubtedly boost demand for iron and steel products. In the Philippines, the surge of public-private partnerships in infrastructure development, expansion of the real estate industry, growth of the housing industry, and the emergence of the shipbuilding industry will intensify demand for iron and steel products.


The local iron and steel sector contributes less than 2 percent of total employment in the manufacturing industry. The lack of upstream steel manufacturing facilities after the closure of Global Steel has led to the downscaling or closure of many steel plants. This development has even reduced the industry’s manpower by 16 percent from 19,700 in 2003 to 17,000 in 2012. Its employment multiplier effect shows that it can generate at least 155 additional permanent employees for every Php100 million investment in the industy.


The Philippine Iron & Steel industry is currently operating far below its economic potential because it lacks the integration of the industry. There is no iron and steel making to supply the midstream and downstream steel requirements of the flat steel producers. The industry

produces billets for the long product sector.

The upstream section of the industry is said to have one of the most value addition in the industry. However, it may not be feasible to develop the upstream section at this time in view of the scattered iron ore deposits. In this regard, the approach of small-scale mining with on-site processing is currently being discussed.

Another potential exists in the midstream section to produce the flat sheets for the automotive, shipbuilding and home appliance industries, among others. These require specific technical specifications that could command higher prices than the low-end iron and steel products.

Spillover Effects

The iron and steel industry is widely considered one of the catalysts of industrialization and a major backbone of all industries in the economy. It remains a major driver in raising national output. In fact, industrialization in many countries is strategically linked with the growth and development of the iron and steel industry. The domestic output multiplier of the industry is higher than construction, private health services, transportation, financial intermediation, wholesale and retail trade, other personal services, real estate, nickel mining, private education and mining/quarrying. It is overtaken by only five other sectors: manufacturing, fishing, agriculture and forestry, electricity/gas/water, and hotel/restaurants.


The iron and steel industry is highly energy-intensive industry due to the huge requirements of the electric arc furnaces. According to industry estimates, the share of fuel and electricity cost to total operating cost is within the range of 5-30 percent depending on the technology and age of the steel plant and the type of steel product produced. The


country’s lack of available sustainable power in Mindanao and high cost of electricity have been cited as impediment to the development of the local iron and steel industry and one of the major factors why it cannot compete in the international markets.

Further, the level of production technology of Philippine steel producers vary from state-of-the-art to over two decades old. Most new investments in process technologies are driven by short-term profit-seeking brought about by a lack of long-term vision. The last mini-mills in the country were established in 1996-1998, and no new mills to produce steel products like bars, wire rods, hot rolled coils/sheets/plates have been opened since then. Most of the “new” steel mills (actually, using second hand equipment from China) are rolling mills for the long products sections and rebars. Scrap-based integrated mills using Electric Arc Furnace are normally called Mini-mills to distinguish it from ore-based integrated mills using the Blast furnace route.

There is also rampant smuggling of iron and steel products. Smuggling creates an uneven playing field among competing firms since the effective price of the smuggled raw materials and/or intermediate goods are much lower than the prevailing market price. The bulk of the smuggled steel products come from China. It has resulted in the closure of several steel plants in the country. Moreover, capacity utilization of the surviving firms continues to drop with unabated smuggling. Smuggling of steel products occurs through: (1) technical smuggling; (2) diversion through customs-bonded warehouses; and (3) outright smuggling. Technical smuggling is prevalent through undervaluation of prices, misdeclaration of nature of goods, misclassification of tariff heading, and undervaluation of volume or weight. On the other hand, in outright smuggling, imported goods are not registered at all with customs and other institutions.

The industry has likewise raised distortion in tariff rates wherein some raw materials are subjected to duty, whereas the finished product is not. The distortion stems out of the differences in the schedule of tariff reduction in the MFN rate and the Free Trade Agreement rates. In the case of steel billets (the raw material for steel angle bars), the MFN rate is at 3 percent while the ASEAN, China and Korea are zero-rated. The finished product produced from billets (including steel angle) from China, ASEAN and Korea are also zero-rated. The finished product from the rest of the world has an MFN rate of 7 percent.

Policy Response

Below are the proposed policy responses to the mentioned binding constraints of the industry:

· Entitlement to generate its own electricity, either directly or through co-generation, build-operate-and-transfer and other contracts;

· Financing of projects through official development assistance;

· Tax and duty exemptions on imported equipment;

· Tax credit on domestic capital equipment;· Authority to contract loans, credits and

indebtedness in any convertible foreign currency or capital goods from foreign financial institutions or fund sources;

· Rationalization of the country’s tariff incentive and protection scheme to enhance the viability of the local iron and steel industry.

i. Tool and Die

The tool and die industry is one that uses general and specialized metal cutting technology to fabricate dies, molds and toolings employed to convert raw materials into a desired shape. The common products of this sector include dies (simple, compound and progressive), molds


(for forging, plastics injection or blow molding, die casting, glass blow molding) and tools, such as jigs and fixtures used for cutting and shaping different materials.


An industry survey conducted in 2005 showed that the tool and die industry employed a total of 5,862 personnel.

The tool and die industry has exported a total of US$7.2 million in 2012, a much accelerated performance from 2011’s export figures of US$1.3 million and US$1.25 million in 2010. The estimated local sales of the industry is US$12 million in 2011.


Based on the Japan Overseas Development Corporation (JODC) study in 2002 on technical assistance for capacity building for the Philippine Die and Mould Association (PDMA), it has been found that with respect to the cost of tool and die making, the Philippines is on the least expensive side and can still compete with better quality and delivery time of Taiwan, Thailand and China.

The tool and die industry’s main strength and comparative advantage are the skills and competence of Filipino tool and die engineers, technicians and specialists. The Philippines’ wages are relatively cost-competitive compared to ASEAN neighbors, plus we have a growing pool of engineers that can be employed in the metalworking industries.

Spillover Effects

The tool and die industry exhibits linkages with the major manufacturing industries in the country, such as the motor vehicles, electronics/semiconductors, furniture, homewares, food and beverage, health, cosmetics and pharmaceutical

products. A goal of the roadmap is increased localization of dies and moulds, which means expanding the local market and providing measures which would encourage large manufacturing companies to procure their die and mould requirements locally.


The major raw materials used in the industry are mainly special steels which are not locally produced. There is no steelmaking facility in the Philippines to process these special metals. High cost of shipping adds to the price of the already expensive raw metal. If high quality metals, such as high grade steel and aluminum are required, then the price is driven up more. Indeed, the cost of direct raw materials account for 34 percent of production cost. Consumables for this industry are likewise imported, e.g., cutting tools, and coolants.

The industry employs general and specialized metal machining equipment, (e.g. lathes, milling machines, surface grinders, EDM, CNC, etc.) and software, (such as CAD and CAM). These expensive technologies, such as CNC’s, coating techniques, (e.g. CVD and PVD), robotics, automation and rapid prototyping, while necessary for future viability, is discouraging acquisition by a lot of companies. This directly leads to the industry lagging behind in technological competency compared to other countries. Recent studies show that the Philippines tool and die industry is about 3-5 years behind developing countries and 10 years behind compared to highly developed ones.

Tool and die firms also mention the absence of some metallurgical facilities which are needed by the industry. These facilities are not regularly needed, thus capital investment on one is not really justifiable. However, its use may be occasionally warranted when some special projects are undertaken. A commonly cited facility is a vacuum heat treatment


facility used for treating specialty alloys like high grade steel and aluminum. Another engineering facility that would be useful to the industry is the surface hard coating facility. This facility may employ current techniques such as physical vapor deposition (PVD), chemical vapor deposition (CVD) and plasma-enhanced deposition.

One upgrade that the industry needs, especially the small companies, is in software applications. The field of tool design is one of the most diverse and time-consuming aspects of tool and die making. It consists of several steps which include analysis, planning, design and construction. Design software cuts the processing time and allows for the prediction of mould or tool performance without the need for actual prototyping and qualification tries. In the absence of this software, tool manufacturing turns to trial and error which proves costly in the end. Unfortunately, advanced design software is continually becoming more expensive and unaffordable for small enterprises.

Policy Response

In view of the above, investments will be encouraged for pioneering and expanding tool and die firms to invest and build up their capabilities through upgrading and acquiring new technologies to enhance their firm-level competitiveness. Incentivizing the tool and die industry can help in building up their capability, with the ultimate goal of meeting the local die and mold requirements of the large manufacturing companies in the Philippines, thereby strengthening domestic linkages in manufacturing, increasing sound economic activities and promoting employment generation among the metals and engineering industries.

The industry is open to partnership and joint ventures with foreign companies in order to improve the reliability of the Philippines as a tool and die making country. This includes

investment promotions and crafting of value propositions for the tool and die industry to be handed out to foreign investors. In addition, the BOI may look for potential investors who are willing to set up a steelmaking facility in the country so as to localize the sourcing of raw materials such as special steel.

The DOST-MIRDC has approved funding for the establishment of the Die and Mould Solution Center (DMSC) in its compound. The DMSC aims to enhance the competitiveness of the local tool and die sector in support of the automotive industry through the acquisition of the needed technology and facilities to support the competitiveness in the localization of currently imported dies and moulds. It serves as a common service facility for the local tool and die makers under a facility-sharing scheme at reasonable rates. The agency is also gearing up to provide consultancy and training on specialized techniques and procedures relevant to tool, die and mould-making.

To address the shortage of tool and die engineers and specialists, work on the integration of tool and die in the education system, as well as creation of an updated Tool and Die vocational course by the Technical Education and Skills Development Authority (TESDA), and a dedicated engineering course will be pursued.

j. Rubber Products

At present, there are 46 companies that comprise the rubber products industry. Of these, 26 are direct industry players while the rest are suppliers (e.g. natural latex, and crumb rubber, synthetic rubber, additives, and polymers, carbon black, release agent, tube valve, organic pigments, bead wire, and tire cord) as well as sources of business development services (e.g. agents, brokers and cargo container lines).


The manufacturing output of the group looks robust but capacity utilization is relatively low at an aggregate of 66 percent. Information gleaned from interaction with stakeholders shows that the sector is not competitive, if competitiveness is expressed as the ability to export rubber products. The 4 firms that are currently exporting have tie-up arrangements with foreign companies (in the form of ownership as well as technology transfer). The sector’s process technology is a mix of low, medium, and very high.


Respondent firms employed a total of 2,994 direct workers and 921 indirect employees. Product price is cited as the most important driver that influences the sector’s market, followed by quality, marketing channels, and industry standards (in that descending order).


Rubber products are used in a myriad of industrial, household and medical goods. At present, the local rubber product manufacturers produce only a limited number of products. There is thus the potential to move up the value chain in terms of doing more products that could be supplied to the automotive, industrial machinery, footwear, medical supplies, coatings, and other industries.

Spillover Effects

The Philippines is one of the few countries where rubber trees can viably grow. The rubber tree grows best in the tropics at temperatures ranging from 20°C to 28°C. It grows in all types of soil with year-round rainfall. In the Philippines, rubber grows mostly in Mindanao.

It is noted that 70 percent of total natural rubber production goes to the tire industry and construction works (roads, bridges, buildings, sports race tracks, etc.) while the rest goes

to non-tire products such as gloves, medical wares, sports wares, shoes, balls, rubberwood for floor tiles, furniture, plywood, cabinets, and toys. Thus, there is potential for the Philippines to be a major supplier of rubber products both in the domestic and international market.


The gap in the industry is the supply of natural rubber to the local producers. As informed by the industry, most of the natural rubber produced in the country is exported mainly to China. Thus, rubber product manufacturers resort to importation and are subject to fluctuations in the global supply. Hence, the clamor for an export ban on natural rubber.

Further, the following are the identified binding constraints in the industry:

· Low quality of cup lumps;· High cost of logistics for imported goods as

well as for the transport of natural rubber to the processors/manufacturers(Note: Most of the rubber product manufacturers are in Luzon while the plantations are in Mindanao);

· High cost of power;· Lack of business development services to

support the industry;· Lack of R&D support and testing facilities;· Outdated manufacturing facilities /

processes;· Smuggling;· Peace and order situation in Mindanao;· Investment in higher value-added products.

Policy Response

The following are the recommendations to address the key constraints in the industry:

· Provision of incentives to new and modernizing manufacturing facilities;

· Establishment of an accreditation system for raw rubber suppliers;

· Provision of marketing support;


· Provision of R&D support for product development and establishment of testing facilities;

· Provision of financing support for the upgrade of machinery and equipment.

k. Cement

The Philippine cement industry is one of the few integrated industries in the country. It has strong backward (mining and quarrying) and forward linkages (construction-related sectors). With intensified efforts on improving the country’s infrastructure, the more cement the country needs to sustain the increasing construction activities. According to the industry roadmap, total demand for cement is expected to still increase beyond 2016. The increase will be lower at 3 percent in 2017 but will improve at an average of 4 percent up to 2022. In 2023, there will be a higher increase of 5 percent and an average of 4 percent increase for the next years up to 2030.

Cement production is highly capital-intensive. It requires huge investments and commission of cement plants usually take 3-5 years. The cost of building a cement plant is approximately US$150 million per 1 Million MT of annual production capacity.


The industry employs around 120,000 direct and indirect employees. The cement companies operate in 17 municipalities. These cement plants are often the major source of livelihood and employment opportunities for the community.

Historical data on domestic cement production show that the industry has the general capacity to export. The highest export sales for this industry happened in 2001 with around 1.86 million metric tons and the next highest was in 2008 at US$1.57 million. Since then, exports were declining to 1.57 million metric tons in 2010 to zero in 2011.


Cement production is highly capital intensive. As informed, power cost is around 40 percent of production cost. According to the industry, local cement prices are still lower than in Indonesia, India, Japan and Brunei even without government subsidies.

Based on the industry roadmap, domestic clinker and grinding capacities can meet any upsurge in cement demand. With construction spending expected to increase by an average of 10 percent for the public sector and an average of 8 percent for the private sector up to 2016, cement demand is expected to increase by 4 percent annually.

Other constraints to the further growth of the industry are: input costs, pricing, logistics difficulties and the threat of dumping from China and Vietnam.

Clinker and cement grinding operations are highly efficient and produces minimal scrapped output relative to production process and product quality.

Spillover Effects

The industry’s strong backward and forward linkages with the infrastructure and housing sectors and backward linkages with the mining and quarrying sectors show the extent of spillover the industry has in the economy.

With the industry’s current work with the Department of Environment and Natural Resources (DENR) and DOST to absorb wastes in the operation of its kilns, the industry can also process agricultural and industrial wastes like used tires, oils, mold runners, rice husks and coco husks as alternative fuel and raw material. Such initiative not only benefits the cement manufacturers but also helps in the community’s solid waste management and environmental protection. At full capacity, the industry can co-process more than a million


tons of rice husks annually. The industry is, at present, looking for a mechanism whereby the rice farmers (not millers) will benefit directly from the on-going procurement of rice husks by the industry.

Policy Response

To address the above constraints, the following measures have been identified:

· Strict enforcement of customs laws and technical regulations;

· Continuing investments in the energy sector and infrastructure development to help reduce cement input costs and increase capacity utilization;

· Rationalize transport policy and planning to significantly enhance road network expansion, the development of an extensive railroad system and the modernization of our ports and sub-ports systems. The resulting increased market reach of cement producers can greatly improve the utilization of plant capacities and allow for greater efficiencies in energy consumption.

l. Paper

Paper is a commodity so vital for mankind to fully realize the benefits of modern life, without necessarily bringing undue damage to the environment or depletion of non-renewable natural resources. All aspects of human activities, at one time or another, involved the use of paper and paper-based products. The amount of paper consumed by a country is a measure of its economic progress. Communication between individuals and among nations became possible with the use of paper and business transactions were recorded on paper. Man’s vast knowledge of the world around him is based on messages written on paper in books, magazines, journals, reports, etc. Indeed, a “paperless society” predicted by scientists in the early 80’s has not actually materialized even with the advent of modern technology such as computers, internet, TV, mobile phones, and electronic mail.

The pulp and paper industry in the Philippines has not developed as fast as its Asian counterparts, such as Indonesia, Thailand, Malaysia and China. The development in terms of production and technology levels in this sector is about 15-20 years behind that in Japan, Korea, Taiwan and Australia. For the last 10 years, most of the paper mills have been unable to allocate enough investments in technology upgrading projects needed to attain quality or cost-competitiveness in open market.

By 2012, only 23 paper mills and 5 abaca pulpmills remain in operation. With the shutdown in 2010 of the country’s only integrated pulp and paper mill, PICOP Resources Inc. (forestry-to-papermaking operations), the local industry now has only two (2) types of mills operating: (a) non-integrated recycling paper mills; and (b) non-integrated pulp (abaca) mills. The paper mills, all recycle-based (non-integrated), consist of 10 firms located in Metro Manila (48 percent) and in the regional provinces (52 percent).


As of 2012, the local paper industry directly employs about 6,000 personnel, mostly skilled workers and technical professionals, and contributes value to the economy by sustaining the livelihood opportunities of about 1.2 Million workers in the wastepaper collection, sorting, and hauling sub- sectors. This figure already excludes the more than 12,000 direct and indirect workers who lost their jobs when the country’s only integrated mill, PICOP Resources Inc. ceased operations in Mindanao, which included tree plantation workers and agro-forestry farmers who grew trees and supplied harvested wood to PICOP’s pulp mill.

In 2011, the industry’s exports of paper and board was valued at US$144 million. Exports of abaca pulp, on the other hand, amounts to about US$40 million/year in the past


decade. The paper industry contributes about P30 billion/annum in domestic sales value to the economy, or saves the country US$700 Million/year in foreign exchange from imported paper and board.

In 2010, the country exported 165,000 MT paper and paperboard valued at US$132 million, mostly to Singapore, Hong Kong, South Korea, Taiwan, India and Thailand. Most of these exports are newsprint from Trust International Paper Corporation (TIPCO), averaging 140,000 tons/year. The country also exports abaca pulp to Japan, Netherlands, United Kingdom, USA and France. Around 80 percent of the world’s abaca fiber requirements are sourced from the Philippines.

Latent Comparative Advantage and Moving Up the Value Chain

Domestic paper demand relates directly to per capita economic growth. Since the local paper industry was confined to the local market for so long a time, its development almost merely followed whatever growth there was due to population increase. When literacy, print media, and production and export of goods slumped, demand for paper stagnated. As an indicator of standard of living, the paper products we use today is a fraction of that consumed by Americans, Europeans and our advanced neighbors in Asia. This indicates that, apart from having a lower per capita income, the average Filipino has been reading less, manufacturing goods less, and engaging less actively on educational, cultural, sports, scientific and many economically-productive activities. Despite that use of paper is part of modern society’s life, be it in communication, packaging of products, entertainment or health care, local demand alone could not drive the paper industry into fully developing itself and becoming globally competitive.

The domestic demand for paper continues to rise in real terms because of population growth, rise of electronics and agriculture-based

exports, office services, education, media, and growing demand for consumer items, food, and entertainment. While markets for newspaper and printed communication was hit by the shift to electronic media, paper remains a cost-effective and environmentally-acceptable material for packaging consumer and industrial goods, as well as a practical medium for education, print media and advertising, and office and commercial documents.

The Philippines is the world’s primary source of abaca fiber for cordage production and pulp for specialty paper manufacture (DBP, 1992). Abaca’s strong fibers can be used to reinforce the quality of recycled paper if measures are undertaken to reduce the cost of abaca fiber. Due to its superior strength, abaca pulp is used by the importing countries in the production of tea bags, currency notes, high-strength disposables, and valuable documents requiring long storage and durability in use


Most of the paper mills are small by international standards, with capacities lower than 60,000 tons per year (TPY). There are only 4 manufacturers capable of producing 70,000 tons or more per year. These are Trust International Paper Corporation, United Pulp and Paper Corporation, Bataan 2020 Inc., and Container Corporation of the Philippines.

The following have likewise been identified as constraints to the growth of the industry:

· Raw Material Problem (Wastepaper) - The quality and volume of locally-available wastepaper is not sufficient to meet the requirements of our recycled paper mills. Paper mills resort to importation to help meet their fiber requirements in terms quantity and quality. Many mills are 90-100 percent dependent on wastepaper but are not equipped to handle this kind of material, especially, the low grades of wastepaper and local wastepaper which has poor strength


and contains too high levels of dirt. There is not enough process equipment to clean and treat the low-quality recycled fiber. Recycled paper mills can use some special equipment and chemicals to help solve process problems caused by low-quality wastepaper, but many mills lack funds to invest in these modern methods. Most mills do not even have enough laboratory facilities to evaluate the effects of chemicals and new equipment. These bring production losses and, therefore, increased operating costs.

· Raw Material Problems (Virgin Pulp) - There is no local market pulp mill to support the virgin fiber requirements for strong packaging and high-grade graphic papers or for enhancing the quality of recycled fibers in tissue, newsprint and paperboard. Pulp is totally imported and its supply is subject to the uncertainties of foreign exchange rate. More than these, there is no local producer of long-fiber pulp after the country’s only wood pulp mill supplying the industry (Cellophil Resources in Abra), shutdown 20 years ago. There are four abaca pulpmills exporting about 12,000 TPY of the specialty material, but this source of non-wood pulp is just too small or too expensive for common paper grades. In fact, the industry imports about 80,000 TPY virgin pulp, half of which is long-fiber (softwood). In contrast Indonesia, Malaysia, Thailand, and Vietnam have established at least 10 modern pulp mills ranging in sizes from 500-3000 tons per day (TPD) and based on sustainably-managed tree plantations.

· Small-sized Mills, Old Equipment - There are too many small and slow machines running commodity grades like containerboard and packaging paper, surviving on low profit margin and making inconsistent quality products. Majority of paper machines in the Philippines are still in the 50-60 TPD (and lower) capacity. The international standard for paper machines running commodity

grades of paper and board is 500-1,000 TPD. It is widely known that the minimum economic size for a new paper machine on commodity grades is 150 TPD and should operate at speeds exceeding 400 meters/minute. In developed countries (e.g. Canada, Scandinavia, Australia) paper machine sizes of 800-1,200 TPD running at speeds of 600-1,200 m/min. are typical. The new mills in Indonesia, Thailand, Malaysia and China have paper machine capacities of 500-1,200 TPD and run at speeds of 600-1,000 m/min.

Although obsolescence is not a problem per se in many mills, spare parts for very old machines are difficult to find. Drawings and plans are not updated or missing and equipment specifications are not known to younger workers, delaying parts replenishment, downtime troubleshooting or execution of improvement projects. And with metal fatigue or too advanced wear and tear, equipment reliability is greatly reduced. This has led to frequent breakdowns and more shutdown time for scheduled repairs, lowering machine efficiencies.

· High Energy Costs - The paper manufacturing industry suffers from high electricity and fuel costs.

· Dumping - Imports are rising not only because of customer demand for grades having qualities that local manufacturers could not satisfy but also because of cuts and reduced duties on imports. There have been dumping from giant producers in North America and Indonesia and other developed countries when their own markets weaken (naturally, they would constrict supply or drastically raise prices when their home demands pick up). This concern is now overtaken by the influx of low-cost exports from large exporters of paper from Indonesia, Thailand and China who have globalized their paper industries ahead of us.


· The industry is plagued with heavy financial burden, especially, interest on working or short-term capital while long term investment funds with international borrowing rates are lacking.

· By early 2000’s, labor problems, environmental sanctions and changes in ownership or corporate priorities hit the operations of several paper mills, taking out of commission about 200,000 TPD or 20 percent of productive capacity.

· Loss of productivity and plant efficiency caused by the continued departure of skilled craftsmen and technical professionals from the industry. Experienced and highly-trained personnel have left the local paper industry to work overseas or move to other local industries. This large turnover contributed significantly to a decline in maintenance effectiveness at many mills and our capabilities to manage operating problems methodically. Many young engineers who received pulp and paper trainings from the late 70’s to early 90’s have left the industry. Ironically, one can locate these talents serving competitor mills overseas or other industries. Many mills lack technically-trained and well-motivated personnel to handle pulp and paper mill operations.

Spillover Effects

Most if not all industry sub-sectors, particularly exports of electronics, fruits, handicrafts, garments and furniture, as well as local production of processed food and consumer goods rely significantly on locally-manufactured and imported paper and board as packaging materials.

The packaging industry, a downstream sector of the paper industry, is critical to the export sector since high-quality and sophisticated

packaging is a requirement for success in the global market. (Paper Industry Structure and Competitiveness, FT Asia Consult, Ref. 2). In manufacturing corrugated boxes, paper sack, paper bags and carton boxes, the packaging sector uses linerboard and fluting medium, multi-ply paperboard, sack kraft, and bag paper as component materials. Improving the paper industry as a source of packaging inputs for exporters translate to better competitiveness of Philippine exports.

Upstream, the paper industry is linked to the recycling sector, from where most of the fiber raw materials are sourced by the country’s non-integrated paper mills. As of 2011, the paper industry provides the market for 1.2 Million tons recycled wastepaper per year of which 25 percent is imported.

The paper industry is also vertically linked (albeit indirectly) to the forestry and commercial tree plantation sectors, as well as to agricultural sub-sectors producing by-product fibers and annual crops, for its requirement of virgin pulp. Currently without a local market pulp mill in operation supplying fiber to non-integrated mills, the country imports 80,000 TPY of virgin pulp. In addition, the industry’s requirements for pulp is substituted by importation of high-grade wastepaper and actually diminished significantly by the local paper mills’ non-production of higher grades of paper (which are instead imported from other countries).

This means that the raw material sourcing of the paper industry in Philippines is currently linked to virgin pulp production and forestry operations of pulp producing countries like Indonesia, New Zealand, Europe, and North and South Americas. But a resumption of the tree plantation and pulp production operations in the Philippines similar to that done in Northeastern Mindanao by PICOP from the 70’s-90’s, driven by the paper market’s


demand for fiber, offers tremendous potential to revitalize the local paper industry and restore its huge contributions to the country’s economic development.

Policy Response

Several strategies are recommended to assist the industry. These include improving the recovery of local waste paper and encouraging its use locally; modernization, retooling and rehabilitation of old paper mills; improving and expanding the fiber raw material base of the industry to include agricultural wastes, such as rice straw, sugarcane bagasse, banana, and other plantation wastes, as well as developing mass-plantations of abaca and other annual crops like kenaf, which have promising potentials for utilization in pulp and paper making; possible consolidation of small mills; and, most important of all, developing massive tree plantations and commercial agro-forestry integrated with virgin wood pulp production to help meet the fiber requirements of existing non-integrated paper mills with locally-grown wood pulp.

Specific recommendations are found below:

· Discourage the exportation of local wastepaper,

· Remove remaining tariff duty on imported wastepaper;

· Provide incentives for programs/projects that support improved recovery and recycling of local wastepaper;

· Maintain current tariff duties on finished paper and paper products;

· Fast track the implementation of electronic monitoring of importations and systems, to minimize misdeclaration and technical smuggling and bring greater transparency in Customs operations;

· Grant incentives for programs and projects that address raw material and equipment problems, including capital costs to improve environmental performance in pulp and paper mills;

· Promote the Philippine pulp and paper industry as an attractive business area for investors;

· Support strongly the campaigns of environmental, health and local government authorities and NGO’s to replace plastic with paper in packaging;

· Intensify the campaign against corruption and reward businesses that faithfully comply with government and international laws and regulations.

m. Metalcasting

Metalcasting is the process of forming a shaped metal component by pouring the desired molten alloy into a mould containing a cavity of the desired shape. It is one of the most economical method of making a shaped metal component.

Almost all metalcasters in the Philippines belong to the small and medium business (SME) category. This is true with metalcasters in Japan, the USA and most other countries. As an SME, metalcasters have different institutional support requirements compared to micro and large businesses. Because of their differences, SMEs are more affected by the changes in the environment, such as inflation and changes in the exchange rates than large enterprises (OECD, 2004).


Since 1996, the annual domestic casting production has been on a steady decline as shown in the table below. The most recent survey available showed very significant drop in the production, with a lower than 10% volume in 2012 viz 2002 production.

Alloy 1996 1997 1998 1999 2000 2001 2002 2012Gray Iron 466,164 408,204 351,072 342,792 301,392 370,000 242,340 24,500Ductile Iron 15,912 11,544 11,856 9,984 12,168 11,376 10,644 -Malleable Iron Nil Nil Nil Nil Nil Nil Nil -Low Alloy Steel 6,000 23,700 25,500 32,400 25,500 36,612 52,572 3,500High Alloy Steel 45,132 42,720 26,640 23,520 36,240 34,308 32,472 -Bronze 54,780 34,980 24,420 31,680 33,000 29,076 25,608 1,000Brass 6,696 6,294 5,508 3,240 12,420 14,496 16,920Aluminum 303,960 306,000 190,333 212,160 161,160 137,520 117,348 11,000TOTALS 898,644 833,412 635,329 655,329 581,880 633,388 497,904 40,000


Metalcasting is an example of low level integration industry. Except for scrap metal, energy and manpower, almost all physical production inputs such as raw materials, supplies, production and quality control equipment are all imported.

Casting processes and products are constantly evolving with advancing technology. Processes are increasing in productivity but becoming more complicated and knowledge intensive. Likewise, castings are also evolving – higher performance is being required, alloys are changing or even replaced with non– metal materials. New markets and applications emerge as old markets and applications are slowly being phased out. In this highly dynamic environment, the only way to compete, or even survive is through innovation – continuous improvement of products, processes and organization. Thus, there is a need to continuously upgrade the local industry’s technology and skills development in new foundry technology.


As of 2003, there are 195 foundries in the Philippines with total employment estimated at 12,285 personnel, for an average of 63 personnel per foundry. Almost all metalcasting companies have less than 200 employees.

Based on National Statistics Office statistics3 on the export data for cast iron, aluminum and bronze from 2006-2011, the following observations can be derived:

· Cast iron exports have decreased over the 6-year period down to approximately US$150,000.00 in 2011;

· Cast steel exports have decreased over the 5 – year period from 2006-2010, and jumped significantly from almost zero export to US$13.5 Million worth of export in 2011;

· The cast aluminum exports gradually increased over the 3-year period from 2009-2011 with an approximate US$17 Million worth of exports in 2011;

· Cast bronze exports are almost nil in 2011 following a declining trend over the 6-year record.

3 Metalcasting Industry Roadmap


Spillover Effects

Cast metal products are used in virtually all sectors of the economy from transportation, aerospace, defense, energy exploration and conversion, mining, construction, maritime, fluid power, instrumentation, computers and household appliances and products. Examples of cast metal components are engine blocks, suspension parts for all land transport vehicles, valves, pumps, faucets, pipes, fittings, replacement parts for mining, cement, oil field, energy production, surgical equipment, prosthetic and biomedical implants, and components for majority of household and electronic devices we use today. In fact, 90 percent of all manufactured durable goods and 100 percent of all manufacturing equipment contain castings. All industrialized and newly industrialized countries have a strong metalcasting industry as one of the major drivers of industrialization.

Majority of the durable goods and manufacturing machines do not exist as purely castings. Most of them contain parts manufactured through other processes such as metalworking, machining and integration. In itself, the contribution of metalcasting industry to the country’s GDP is small. But with the development of other metals engineering industries such as metalworking, equipment, and machinery manufacturing, the metalcasting industry contribution can be significant. In this age of globalization, the presence of a competitive metalcasting industry can attract and maintain MNCs which use castings as one of the major inputs. The Philippines needs a strong and capable metalcasting industry to support the development of machine, equipment manufacturing and other metals engineering sector.

Policy Response

The Philippine metalcasters need to be competitive if they are to survive. Competitiveness is created within the organization but its implementation is dictated and influenced by the availability of support from government institutions and suppliers (Aldaba, 2008). Support programs such as easy access and competitive financing rates, availability of skilled workers, technical support programs for training, technology development and transfer, and market linkages create the confidence needed by entrepreneurs to invest and increase exposure.To assist the industry, the following measures have been identified:

· Promotion of clustering of industries;· Provision of incentives to the production of

identified critical metal industries in the core industries such as automotive, shipbuilding, electronics, etc.;

· Strengthening of MIRDC’s focus on the foundry innovation center;

· Inclusion of metalcasting in relevant engineering courses; and

· Updating of TESDA’s foundry training courses to current level of technology.

n. Furniture

As envisioned by the industry, the Philippine furniture industry will be the global design innovator/center/hub for products using sustainable materials by the year 2030. To achieve this, the industry will focus its programs on four (4) key development factors: (1) product development, (2) marketing, (3) capacity building and (4) advocacy.

The three major furniture production areas in the country are in Metro Manila, Pampanga and Cebu. Metro Manila and nearby peripheral cities in CALABARZON (Cavite, Laguna, Batangas, Rizal and Quezon consist of small, medium and large furniture enterprises which specialize on wood furniture and other mixed


materials. Pampanga is associated with hand-carved wood, wicker and iron products whereas Cebu, which used to be the heart of rattan furniture making in the country is now known for its fine wood furniture works.


The Philippine furniture industry, which is 98 percent categorized under SMEs, provides 2.1 million indirect workers nationwide and provides business to 5.4 million in supply chain. In 2013, employment by the industry was recorded at 123,000.

The industry’s overall revenue was estimated to reach US$750 million in 2013 of which exports accounted for US$177 million in 2013 from US$150 million 2012. For this year, the industry is expected to grow by 8 percent with domestic sales growing faster at 8 percent viz export growth at 5 percent. The domestic market has even a bigger potential because of the robust housing sector although there is no official data. The contract markets are also growing here and abroad for hotels, resorts, and entertainment facilities.


Being regarded as the “Milan of Asia” because of its recognized creativity, design and quality, the Philippines has potential to earn more from exports and local sales particularly, in the sophisticated and high end market. At present, the industry represents 0.08 percent of the total exports of the Philippines, with 99 percent of exported furniture coming from Cebu, Metro Manila and Pampanga.

It is noteworthy that the industry intends to be technologically advanced to meet the global market standards by having sustainable materials, improving existing processes, available skilled labor, and advanced machinery.


One major constraint of the industry is the lack of raw materials, specifically wood, because of the total log ban in the country, which deprive manufacturers access to quality wood at affordable prices. Local furniture companies are therefore forced to import their wood requirements from Indonesia and Malaysia. Adding on to the difficulties are the stringent requirements in importing specialty wood species from Europe.

Further, the surge of imports of cheap furniture from the competitor countries has hugely affected the Philippine industry. This aggravated the impact of the recession in major markets as well as the fluctuation in the Peso-US dollar exchange rate resulting to massive downsizing in the industry and at worst, the closure of some firms.

ASEAN countries do not have strong intra-regional furniture trade as the bulk of ASEAN furniture imports come from China. The Philippines, for example, exports most of its products to the US and Europe. Filipino furniture manufacturers are not actively opening outlets in other ASEAN countries.

There is also a shortage of mid-level and skilled workers to sustain the growth of the industry and a lack of a globally-accredited testing laboratory.

Spillover Effects

The industry has strong backward linkages with the forestry and agriculture sectors. It utilizes wood, rattan, bamboo and other materials such as buri, metal, stone/marble and plastic, which are creatively and finely handcrafted into various products including: leg items for chairs, tables, beds, setters case goods such as cabinets, desks, chests of drawers, kitchen storage units, combinations for building/home


fittings, shelves and ornaments. Any increase in sales of the industry would definitely redound to the benefit of farmers and community-based forest organizations.

There would likewise be spillovers in other sectors such as the creative/design, logistics, business services, and packaging sectors. Furniture manufacturers/exporters use the following packaging materials: double corrugated carton box with polyethylene tubes on critical points, kraft paper, abaca fiber straps, plastic bubble sheets, and styropor.

In terms of forward linkages, we also have the hotels, restaurants, offices and other public institutions, contractors and interior design offices.

Policy Response

To assist the industry, the following have been identified as possible interventions:

· Provision of incentives to investments in common service facilities, plantations not covered by the Industrial Tree Plantation law and supply/trading hubs for raw materials;

· Intensified support to marketing and promotion, and market intelligence;

· Provision of R&D support in terms of raw materials and supplies and establishment of testing facilities;

· Assistance in skills training through TESDA.

o. Ceramic Tiles

The ceramic tile industry is a subsector of the construction industry. There are currently four (4) active local players namely: Mariwasa, Lepanto, Ten Zen, and Euro Tiles. The industry’s total installed capacity is estimated at around 30M square meters per annum. All four (4) domestic tile manufacturers have their plant in Luzon and is under the umbrella of the Ceramic Tile Manufacturers’ Association (CTMA).

The ceramic tile market has been expanding, but the growth is hardly felt by the local tile manufacturers due to the surge of imported tiles. The cost of local players are high thus, they are hard up in competing with imported tiles that are sold cheaply in the market. The market share of local players is being eroded by imported tiles which now accounts for more than 50 percent of the total tile market.

The industry’s performance has been negatively affected by the surge of low priced imported tiles. As a result, some of the local players have already streamlined their operations reducing the capacity utilization of the industry to only about 65 percent. The high cost of production has placed local players in a disadvantaged position where imported tiles enterprises seized the opportunity to expand their market. Imported tiles are slowly eating up the market share of local players.


The industry is directly employing more than 2,000 and several thousand more by industries that are directly and indirectly linked to the Ceramic Tile Industry.


The industry has identified the following as challenges to their growth:

· Industry Cost and Production.- Relatively high production cost of local

players as compared to its foreign counterparts due to :ο High fuel and power cost;ο High raw material cost;ο High repair and maintenance cost of

machinery due to age.- Limited source of local raw materials and

high domestic inland freight costs· Technical


- Entry of imported tiles that are not within product standard quality;

- Continuous threat of de-listing ceramic tiles from the mandatory list of items subject to testing.

· Institutional- Lack of policy/ guidelines with regards

to the trade remedies fund that should be appropriated to the local industry in accordance with RA 8800, Safeguards Duty Act;

- Enforcement of customs regulations to minimize/ prevent entry of smuggled and misdeclared goods;

- Policy of DTI-BPS with regards to imported tiles who failed from testing;

- Lack of government assistance in developing small-scale raw material suppliers.

Spillover Effects

As a major construction material, enhancing the competitiveness of the ceramic tiles industry would create significant spillovers to various industries such as hotels, resorts, housing, hospitals, industrial and commercial buildings and other facilities.

It also has strong linkages with mining and quarrying sectors in terms of its raw material sourcing.

Policy Response

The following are the recommendations of the CTMA to address the challenges facing their industry:

· To facilitate/fast track the availability of natural gas and other alternative sources of energy;

· To pass the Anti-Smuggling Bill and undertake strict enforcement of customs regulations;

· Institution of non-trade barriers to help local

manufacturers be more competitive with their foreign counterparts (e.g. retention of the mandatory testing of ceramic tiles);

· Review policy of DTI-Bureau of Product Standards (BPS) regarding imported tiles that failed the test; if possible, consult the local industry concerned during the review;

· More defined guidelines on the implementation of DTI’s monitoring of the mandatory standard for ceramic tiles under PNS ISO 13006:2007;

· Help develop small-scale raw material suppliers to become more efficient and professional in their method of mining and to extend assistance in their capitalization.

2. Agribusiness and Fishery

The agriculture and fisheries sectors are important components of the Philippine economy. From 2009 to 2013, these sectors contributed 10 to 30 percent of the country’s Gross Value-added (GVA), 6 to 8 percent of the country’s total merchandise exports and 31 to 34 percent of the country’s total employment. Further, the agriculture sector employs 32 percent of the Filipino workforce as of 2013, according to World Bank statistics and accounts for 12 percent of Filipino GDP.

While the sectors has been included in the DTI-BOI’s IPP list since 1968, the performance of the agriculture and fisheries sector remained unimpressive. Poverty incidence in the sector is prevalent. In 2009, the highest incidences of poverty among the basic sectors were recorded for fishers (43.6 percent) and farmers (42.4 percent).

Foregoing considered, there is a need to specify agriculture/fishery-related activities for inclusion in the IPP and optimize such inclusion to contribute in the development of the sector and support the government in its pursuit for inclusive growth. The sub-sectoral utilization of the supply-chain based framework of the 2014 IPP enabled the BOI to identify these strategic agriculture/fishery-related activities.


a. Crops

The Department of Agriculture (DA) opines that investments in the commercial production of the following agricultural crops should be continuously promoted:

· Coconut, cassava, coffee and cocoa.· High value crops such as rubber, spices,

vegetables and fruits.· Emerging commodities such as sampaloc,

jackfruit, Peking duck, native pigs, siling labuyo, peanuts, monggo and achuete.

The crops production sub-sector is faced with high cost of inputs such as fertilizers and pesticides – two important components to improve land productivity and increase yield. These inputs typically account for 20-30 percent of total production cost. For some players, high fertilizer and pesticide costs translate to usage rate below recommended thresholds. In line with sustainable development principle, promotion of investments in fertilizer and pesticides comes with an aggressive information/education campaign on the appropriate fertilizer and pesticide usage to avoid agro-climatic imbalance and pollution.

In the case of sugar, particular focus is on the full implementation of the ASEAN Economic Community (AEC) in 2015 when the sugar tariff rate will be reduced to 5 percent from this year’s rate of 10 percent. To enable the local players to be competitive, there is a need to increase productivity not only on the farm side but also on the milling side. There is a need to promote modernization of existing sugar mills to increase sugar recovery rates.

Other non-incentive government interventions required by the sector include:

· Establishment of additional nurseries producing improved seedling/plating material varieties;

· Strengthening research and development for the sector (currently less than 1 percent of the sectors’ GVA contribution) and full integration with agricultural extension services;

· Increased irrigation service area; and, · Bloc farming for scale-sensitive crops such

as sugarcane.

b. Livestock and Poultry

Producers of livestock and poultry products, specifically for hogs and chicken, are concentrated in Central Luzon and CALABARZON regions. Promotion of investments in the livestock and poultry sub-sectors may be concentrated in the non-traditional production areas such as ARMM, Mindoro and Palawan.

The poultry/livestock producers are faced with high cost of feeds, which accounts for as much as 70 percent of total production cost. On top of promoting investments in feed milling (to exclude those feeds to be used for game animals, fowls, and other species for pet/leisure purposes), there is also a need to promote investments in mechanized drying (to reduce post-harvest losses for yellow corn) and production of yellow corn (major feed component). Incentivizing production of corn, in general, was already discussed in the previous section on “crops.”

For the downstream livestock/poultry industry such as the meat processing industry, investments in AAA slaughterhouses and dressing plants shall also be encouraged. Currently, the 24 National Meat Inspection Service (NMIS)-accredited slaughterhouses and dressing plants are not sufficient to cater to the needs of the industry.


The much-needed government interventions include the following:

· Strengthening of the DA-Bureau of Animal Industry’s (BAI) regional testing laboratories (for efficient detection of aflatoxins in yellow corn); and,

· Strengthening of the DA-NMIS considering the expanding demands of the industry beyond meat inspection (e.g., traceability, market surveillance, meat trade competitiveness, etc.).

c. Fisheries

The Philippines, with a total territorial water area of 2.2 million km2 and inland resources of almost 750,000 hectares, is one of the world’s top fish producing country in the world. While we have been exporting large volumes and values of fish products such as tuna, seaweeds/carrageenan, shrimps/prawns, crabs/crab fat and meat, and octopus (export values of these products comprise 76 percent of total fishery exports), the country is also a net importer of fish products. Inasmuch as there is need to boost local fishery production capacity, investments in fishery production should be promoted.

As with the livestock and poultry sub-sectors, investments in the production of aqua feeds shall likewise be promoted.

Considering the high-perishability of fish products vis-à-vis the distance of production sites to local and international market destinations, the fisheries sub-sector is also in need of investments in support infrastructures such as ice plants, blast freezing and cold chain storage facilities.

Interventions needed by the fisheries sub-sector include the following:

· Establishment of fish ports/fish landing facilities in government-identified strategic locations;

· Comprehensive stock assessment program by the DA-Bureau of Fisheries and Aquatic Resources (BFAR);

· Additional government-accredited nurseries, hatcheries and testing laboratories; and,

· Institutionalization of a strong partnership with local government units and the national government (through BFAR) in strengthening fisheries regulation.

d. Natural Rubber

The world production of natural rubber is projected to increase at three to five percent per year up to 2020, i.e. from 17.4 million tons in 2010 to 28.1 million in 2020. According to the DA, however, the country’s rubber industry accounted for only 1.05 percent of the world consumption of rubber in 2004.

Production of rubber reached 106,000 dry tons from an area of 162,000 hectares in 2011 according to the Bureau of Agricultural Statistics (BAS). The new planting of rubber was 22,900 hectares while replanting was only 800 hectares during the same year (Association of Natural Rubber Producing Countries).Industry sources, however, estimate that rubber output in the Philippines is at best 60,000 dry tons, with about 70 percent of the total supply (70,000 tons) going to exports (48,000 tons) and the rest to the domestic market. Assuming an average yield of 0.6 dry tons per hectare, the maximum area harvested would be about 100,000 hectares. The rest of undetermined areas are immature and senile.

Rubber development plays a key role in the reduction of rural poverty and agriculture development in many ASEAN countries specifically Thailand, Indonesia, Malaysia and Vietnam. The Philippines can also embark on the same path as it has the potential of becoming a major rubber producing nation. In fact, rubber is regarded as one of the most profitable agro-industrial businesses in the country that supply the domestic and export markets.


The identified supply chain gaps in the rubber upstream sector:

· Areas for planting;· Lack of quality planting materials;· Low quality of raw rubber;· Lack of skilled tappers;· Location of plantations and rubber

processing facility (Market);· Pre-processing and testing facilities.

The industry has also identified the following constraints to the growth of the sector:

· Tenurial problems (Land Access);· Long gestation period;· Insufficient accredited nurseries, plantations

and pre-processing & testing facilities;· Limited area for rubber planting;· Access to credit;· R&D for the upstream sector;· Slow adaption of productivity-enhancing

technology;· Quality issues for primary rubber processing;· Transport cost (within the Philippines);· Peace and order in the plantation areas.

The following are the recommendations to address the key constraints:

· Incentives for accredited nurseries, certified plantations and pre-processing facilities;

· Support testing facilities;· Support R&D for development of high-

yield varieties;· Capacity Building for tappers;· Marketing support;· Support infrastructure & logistics to lower

transport cost;· Review existing laws.

Special note is taken that the DA has implemented the Rubber Development Program (RDP) in early 2000 as a component of the High Value Commercial Crops Program. The RDP’s goal was to develop a globally competitive rubber industry and empower small farmers, plantation owners,

cooperatives, as well as new investors. The program not only sought to increase investment in the industry through policy reforms and advocacy but was also aimed to give investors access to financing. It tried to expand income opportunities for farmers by identifying derivative products for rubber and looked into improving the sector’s state of technology to make it globally competitive. So far, the program has instituted planting in expanded areas and replanting activities in existing crop lands. The DA also facilitated investment in R&D, training, infrastructure, and human resources development.

e. Natural Health Products

The Philippine Natural Health Products industry is an emerging industry rising out of the country‘s mainstream agriculture-based industries. It represents a wide spectrum of experts and scientists, as well as companies engaged in R&D, farming, production, processing, trade and marketing of health-related ingredients or raw materials, including the transformation of raw materials or ingredients into finished products and health-related services. These are in the form of botanicals, semi-finished products, either in their natural state or transformed states, such as using isolated actives and bioactive ingredients and other similar forms.

In 2011, local sales of Philippine herbal/traditional products increased by 7 percent compared to its total value in 2010 (Source: Euromonitor International website). Increasing consumer preference for safe treatments and the growing health and wellness trend in the Philippines are the major factors contributing to the growth of the industry. In addition, companies emphasize the safety of these products and claim that they provide the same health benefits as the standard medicines without risk and other side effects.


Growing interest in natural and organic food has transformed a small market niche into a double-digit growth sector with global sales estimated at US$91 billion in 2011. Retailers, suppliers and producers both natural and mainstream are meeting this demand with new foods and organic alternatives to conventional products.

Based on the interview with DA Secretary Proceso Alcala, the current demand for natural ingredients in the global market is US$400 billion. From the current forecast of the Global Industry Analyst, Inc., the global herbal supplement and remedies is estimated to be a US$107 billion industry by 2017.


There is no estimate as to the total employment of the industry but based on industry survey, a large manufacturing firm employs an average of 200 individuals, 50 percent of which would be involved in marketing and distribution. A small-scale firm engaged in the production of natural ingredients gives livelihood to around 450 people, 35 percent of which would be directly under the firm while the rest would be the farmers and raw material producers.

In 2011, based on the export data from DTI-Export Management Bureau (EMB), the Philippine natural and organic products have an estimated total export value (FOB) of about US$153 million. The major contributor of the growth in the sector is the medicinal plants/foods and the personal care category.


One of the biggest global trends in the past 20 years has been the growing interest in health and well-being. It has become increasingly important to consumers to improve both their health and the environment they live in. Hence, natural and organic household and home care

products that include surface, laundry and dish cleaners, pet food, flower and linens and fibers are becoming more in demand.

Considering the more than 850 species of medicinal plants that have potential as new natural ingredients, a growing domestic and global market and a rapidly increasing number of companies engaged in the business, there is a bright prospect for the industry especially in terms of quality and supply of natural health products.

Spillover Effects

The development of the natural health products industry will greatly benefit the agriculture sector, particularly, the farmers who supply raw materials such as ampalaya, sambong, lagundi, malunggay, banaba, and luya, among others through contract growing schemes.


Like in the rubber products industry, the main supply chain gap in this industry is the supply of organic/natural raw materials. Other raw materials are imported already processed by the industry such as in the case of melatonin, valerian roots, chamomile, steria, insulin fiber, different plant extracts, amino acids collagens and other functional raw materials since foreign suppliers are already internationally certified and comply with international standards for ingredients.

Further, the following have been identified by the industry as key constraints to their growth and development:

· Insufficient nurseries, plantations and pre-processing facilities;

· Slow adaption of productivity-enhancing technology;

· Lack of pre-processing and clinical trial facilities;

· Weak industry integration and weak capacity of players (mostly MSMEs);


· Lack of certification system;· Weak linkage among scientists, research

institutions and private sector;· Lack of standards.

Policy Response

To mitigate the impacts of the above, the following have been recommended:

· Provision of incentives to commercial production of crops used for natural health products as well as to those that will establish nurseries and processing plants;

· Provision of R&D support, clinical trial facilities and state-of-the-art testing facilities;

· Establishment of a certification system consistent with international standards;

· Provision of support to marketing, promotion and market studies;

· Provision of financing support and capacity-building for MSMEs.

f. Agriculture-related infrastructures, facilities and support-services

In line with the objectives of the government embodied through R.A. No. 8435 (Agriculture and Fisheries Modernization Act of 1997) and the recent R.A. No. 10601 (Agriculture and Fisheries Mechanization Law of 2012), investments in mechanized agricultural support services such as harvesting, plowing, spraying and dusting should be encouraged. Investments in support infrastructures (on top of mechanized drying, cold chain storage, blast freezing, ice plants, slaughter houses and dressing plants as these were already discussed) such as bulk handling, packing house and trading centers should likewise be encouraged.

3. Services

The Services sector plays an increasingly important role in the growth and development of developing countries. Services present alternative opportunities for the Philippines to fast track economic growth by building on niches to specialize on and scale up in order to achieve explosive growth.4

The role of the Services sector to poverty reduction is currently higher than the contribution to growth of the agriculture or manufacturing sectors. Strengthening the Services sector will result to increase in backward and forward integration in the domestic economy and boost international trade linkages.5 This is in line with the Comprehensive National Industrial Strategy (CNIS).

Services grew 7.1 percent in 2013, accounting for 57 percent of the economy and contributing more than half of the increase in GDP. The strong growth was buoyed by business services which include higher value business process outsourcing (BPO) and real estate activities, among others.6 Further increase is expected with the growth of emerging Services revenue streams such as IC Design, Hospital/Medical Services, Maintenance, Repair and Overhaul (MRO) of Aircraft, and Ship Repair Services.

Given the multifaceted contribution to national economy and trade, it is important for the government to ensure that the Services sector is nurtured and supported through fiscal and non-fiscal measures achieved through a proactive public and private sector consultation process. The right blend of policies can be implemented towards this end in order to synergize policy and mobilize resources to further boost the sector’s contribution to growth and development.

4The Service Revolution, EjazGhanii, Paper presented at ILO Conference, Geneva, 2011 5World Bank presentation, “Role of Services in Economic Development”; Geneva, July 2012 (Data source:

World Bank, 2010)6Asian Development Outlook 2014


a. Knowledge-Based Services

The Philippines is a mature location for IT-BPM services. In 2010, the country emerged as the number one voice BPM provider in the world. Non-voice services and global in-house centers (GICs) also gained traction, raising the Philippines’ prominence as the number two location worldwide.

The anticipated growth in the domestic market due to the improving economy and resulting consumption spending will lead to increase demand. Services play a key role in improving competitiveness of all industries because it will strengthen backward and forward linkages among the primary and the secondary sectors. This is an effective component of a comprehensive development strategy.7

IT-BPM services are generally categorized into horizontal or vertical services, as follows:

· Sales and Customer Relations Management;· Back Office / KPO (Marketing Research,

Legal Case Research and Preparation, Medical Research, Insurance, Mortgage, F&A, HR, Payroll, Procurement);

· Software Development(Product Development, Embedded SW, Project Management, Quality Assurance) and IT Services (Business Continuity/Disaster Recovery, Web Hosting, Network Management);

· Health Information Management (HIM), i.e., Claims Processing, Coding and Billing, Electronic Medical Records/Electronic Health Records;

· Transcription (Medical, Legal, Publishing, Data Transformation, Film Subtitling);

· Creative Content (Games Development and Animation);

· Engineering and Architecture Design.

The World Bank reports that higher labor productivity (sales/employees) is associated with greater usage of professional services in

7World Bank, July 2012, Nora Dihel, Africa Region - Poverty Reduction and Economic Management Unit

all East African countries, especially for small firms.8 The growth in the services sector is also more correlated to poverty reduction than the contribution of growth in the agriculture for a sample of 50 developing countries.9 Directly, they provide the largest source of new job growth. Indirectly, they provide the income that, when spent, drives further demand for goods and services and jobs to produce these.10


IT-BPM reached about $15.5 billion export revenues in 2013. This represents a 17 percent growth from 2012. The industry created more than 140,000 new jobs reaching about 900,000. It is expected to create 100,000 more in 2014. The industry is still on track to revenue and employment projections by 2016.11


The industry targets to employ more than 1.3 million direct employees and contribute around 8 percent of GDP. To do this, the IT-BPM has to diversify significantly in breadth, scale, and maturity of services. It has to evolve dramatically, with non-voice, complex services as the fastest developing segments. Prominent industry verticals include healthcare, software development, and creative services (animation and game development). These sectors need a strong domestic base to be able to build competitiveness. Knowledge-Based Services providers can help find appropriate solutions/systems like healthcare, transportation systems, disaster risk prevention, e-government systems, among others.

One potential growth segment of the industry is the HIM services sector as it is information-intensive. It leverages ICT to ensure better delivery of services and widespread access

8World Bank, July 2012, Nora Dihel, Africa Region - Poverty Reduction and Economic Management Unit9 The Service Revolution, EjazGhanii, Paper presented at ILO Conference, Geneva, 2011 10Ibid.11Information Technology and Business Process Association of the Philippines (IBPAP)


to health care services.12 Many hospitals/medical facilities lack capacity to implement HIM systems due to high cost of investing, installation, and maintenance.

Policy interventions are necessary to build a knowledge economy in order to foster development and growth of globally competitive Filipino companies. The main drive is to move up the value chain and become more specialized in high value-added activities and Knowledge-Based Services represent the link between innovation and commercialization.


The main constraint of the industry is insufficient supply of talent to the different segments. While there is a large pool of labor available for the industry, additional skills training and English proficiency are needed to have them employed. Likewise, there is a pervading concern that parents do not prefer their children to be employed in the industry because of the workshifts.

Another constraint would be the lack of network redundancy in the areas other than central business districts. This offers limited location options for IT-BPM companies that contribute to geographical shortages in available manpower.

Other identified constraints include the following:

· Presence of MNCs in the Philippines put a further strain in the talent supply and cost of doing business for local companies;

· Volume of funds for MSMEs lending has been inadequate as traditional government / private sector financing is more likely to be allocated toward livelihood and microenterprise projects, many of which fail to grow;13

12Ibid13Aldaba, PIDS, 2012

· Prohibitive cost of software and hardware for animation and game development operations hamper growth. The same can be observed for hospital/medical facilities in integrating HIM systems;

· Limited resources for marketing and promotion to build a country brand.

Policy Response

To address the above, the following interventions have been identified for the industry:

· Provision of incentives to the selected segments of the industry to stimulate innovation and commercialization of locally produced products/services (e.g. animation & game development) that create/produce Intellectual Property for commercial sale and to the emerging high value services such as HIM activities to address the lack of capacity of hospitals/medical facilities to ensure the achievement of the government goals of better health outcomes and responsive health system;14

· Promotion of more PPPs to address concerns on talent supply, financing, ease of doing business, market access, promotion and marketing.

4. Housing

Generally, the housing sector is divided into five segments namely: socialized (Php450,000.00 and below), economic (above Php450,000.00 to Php1.25 million), low cost (Php1.25 million to Php3 million), medium cost (above Php3 million to Php4 million) and open market (above Php4 million).

To date, the Philippines faces an estimated unserved housing need of 3.9-million, including 832,000 households that cannot afford decent shelter. The magnitude of housing need is estimated to soar to 5.8 million housing units by 2016.

The Housing Industry Roadmap of the Philippines 2012-2030 envisions eliminating the housing

14Philippines eHealth Strategic Framework and Plan 2013-2017


backlog by 2030 by increasing housing production, enhancing shelter affordability through a comprehensive housing subsidy program for targeted beneficiaries, mobilizing and generating housing finance for end-user financing support, and improving the regulatory environment for housing.15

In 2012, the construction sector was able to contribute a total of Php345 billion to the economy (from Php302 billion in 2011), increasing its share to GDP from 5.1 percent in 2011 to 5.5 percent in 2012. For the year 2013, this sector contributed a significant 5.6 percent share to the county’s GDP.

Employment

The housing sector has high contribution to employment as well as the potential to contribute such in the coming years. This sector’s employment multiplier shows that it can create an additional 2,032 jobs for every 1 billion of investments.


A recent study16 shows that from the years 2001-2011, bulk of the housing backlog is composed of the economic type of housing at almost 1.96 million units, followed by the deficit from socialized and low cost housing at 663,282 units and 462,160 units, respectively. Taking into account the country’s future needs until 2028 for these segments (socialized, economic, low cost), the country is facing a total deficit of 3.2 million of housing units for both economic and low cost housing segments while socialized is expected to be at a deficit of 1.6 million units. The limited space on which housing can be provided in highly-populated areas exacerbate the backlog situation. As such, vertical housing needs to complement supply where horizontal housing would not be feasible anymore.

It is also seen that there is a need for competitively priced inputs especially needed in building socialized, economic and low cost housing units

15The Housing Industry Roadmap of the Philippine 2012-2030 by SHDA and UA&P, page 316The Housing Industry Roadmap of the Philippine 2012-2030 by SHDA and UA&P, page 58

to ensure its affordability to the lower segment of the country’s population. There are inputs for housing construction that are cheaper if imported. However, there is also a need to increase the inputs that can be locally produced.

Production inputs of the housing industry can be divided into intermediate inputs and primary inputs. Intermediate input accounts for the 46 percent of the production structure and these include metal, wood and land transportation. On the other hand, primary output which composes of labor and capital accounts for the remaining 54 percent.

In case of the most binding constraints, regulatory concerns topped the list. Among these regulatory-related issues include difficulties in securing permits and licenses needed such as the Development Permit (DP), License-to-Sell (LTS), and Certificate of Registrations (COR). Most of the developers also experienced difficulty in securing BIR rulings. Non-harmonized national and local rules and regulations in securing permits and licenses, which eventually increase construction costs, are also among these constraints.

Spillover Effects

The spillover effects of the housing sector are also notably high. Creating or developing a community tends to increase economic activities (opening up of sari-sari stores and other trade inducing practices, among others) in addition to the social development (building of hospitals, schools, and public transport) that it brings. In addition, housing construction involves different sectors such as but not limited to cement, iron and steel, copper electrical wires, paints, ceramics, etc. that are of significant contribution to the country’s economy.

Competitive market is also high for mass housing. Given the existing and continuous demand for housing, housing developers have been in dynamic competition with each other by giving the most economical housing units for end-users.


Policy Response

The continued listing of economic and low cost housing in the preferred areas of investments will encourage more developers to construct low cost housing for the low income group, in addition to the fact that housing is classified as a “merit good”, a social aspect of giving incentives. In addition to direct investments through housing development, BOI-registered housing projects also contribute in the production of socialized housing through its compliance projects, which is equivalent to either 20 percent of the main project’s total project cost or 20 percent of its total saleable area. BOI requires its registered mass housing projects to comply to the said 20 percent socialized housing requirement under Section 18 (Balanced Housing) of R.A. No. 7279 or Urban and Housing Development Act of 1992 (UDHA). Even if it is not stipulated under the law, vertical housing projects are also required to comply with the socialized housing requirements under BOI guidelines and closely monitor the same.

There is also a need to look at common facilities such as the drainage, sewerage, and other infrastructure needs for housing and there is also a need to address financing for low income housing beneficiaries.

To augment identified supply chain gaps in the housing sector, the “Reverse Trade Arrangement”17 initiative of the DTI-BOI is now in its conceptualization stage, and is getting positive response from the industry players that produces key inputs for the production of housing such as paints of the chemical industry, cement, iron and steel. The success of this initiative will not just address the supply chain gap of the housing sector but is also expected to contribute in the revival of the local manufacturing industry.

Other policy responses aside from fiscal incentives, would be the harmonization of existing national and local regulations so as not to confuse the developers and to avoid additional cost to them.

17 An interaction between buyers/end-users and sellers/manufacturers wherein the buyers/end-users (in this case is the housing developer) present their needs and arrange for preferential pricing for inputs from interested sellers/manufacturers (input producers) that will supply the inputs for production needed by the former.

The development of public rental housing opportunities through in-city socialized mid-rise buildings (MRBs) should also be looked into.

5. Hospitals

Health service delivery in the Philippines developed into primary dual administration systems run by public and private provisioning. In a decentralized system as that of the Philippines, public health services are mainly delivered by LGUs with the technical aid of the national government through the DOH. The nearest service available to households is the Barangay Health Services (BHS). On the other hand, the private sector delivers services through hospitals, freestanding clinics, and group practice or polyclinics. The country has 13 private hospitals with international accreditation.

Comparative 2010 figures on hospital bed-to-population ratio among selected Asian countries show that the Philippines (at 1:855) lags behind Indonesia (at 1:667), Vietnam (at 1:610), Thailand (at 1:467), China at (1:400), Singapore (at 1:381), and Japan (at 1:71).

Employment

The health care sector has a medical manpower pool of 1.06 million in 2010(doctors, nurses, dentists, physical and occupational therapists, pharmacists, medical technologists, and laboratory technicians), with estimated multiplier of 2,505 additional workers for every PhP1 billion additional demand in healthcare services.

The percentage share of health budget to the total national budget as of 2014 is 3.07. This is 22.31 percent higher from 2.51 percent in 2013.

Health sector is information intensive.18 It can benefit from appropriate use of ICT (i.e., medical coding/ billing, claims processing, electronic medical records) directed towards ensuring the achievement of the health system goals of better health outcomes, sustained health financing and responsive health system.19

18 Alvin B. Marcelo, MD, Chief Information Officer, PhilHealth, The Philippine eHealth Development Plan, Leveraging ICT for a More Efficient Health Sector, 2013

19Philippines eHealth Strategic Framework and Plan 2013-2017


Supply Gap/Binding Constraints

As of 31 December 2012, there are a total of 1,824 public and private hospitals (Levels 1, 2, 3 & 4) spread throughout the country, with a total of 101,437 beds. Based on this number and the 2012 estimated population, the national hospital bed-to-population ratio is currently at 1:945. The ratio is compliant to DOH standard of 1:1000 ratio. However, regional ratios using 2012 number of beds and 2010 regional population show that 13 out of 17 regions (76 percent) do not yet meet the standard. Further, 4 out of 17 cities in NCR (23 percent) and 52 provinces out of 82 provinces throughout the country (63 percent) do not yet meet the standard. The hospital bed-population ratio in some regions/provinces does not meet the DOH standard of 1:1000, much more the WHO standard of 1:500 and lags behind our ASEAN neighbors. In addition, there is lack of investments and adoption of fast-changing technology to keep pace with international counterparts.

There are also gaps in the distribution of medical and allied professionals across the country, more doctors and nurses are available in cities and urban areas compared to rural areas. Related to this gap, is the constraint to growth where medical and allied health professionals prefer to practice in urban areas.

Health Information Management (HIM) is likewise inadequate or lacking in many hospital/medical facilities due to high cost of investing, installation, and maintenance.

Policy Response

To improve the hospital bed to population ratio, the inclusion of hospitals in the BOI’s annual IPP has been considered. This would not only improve the bed to population ratio but also encourage new hospital to acquire new equipment and technologies to enhance healthcare services in the country.

Healthcare Information Communication Techonology (ICT) systems implementation is crucial to achieve the eHealth 2020 vision of the DOH which ensures widespread access to health

care services, health information, and securely share and exchange patients’ information. This transforms the way information is used to plan, manage, deliver and monitor health services.20 HIM systems integrators, which are covered by Knowledge-Based Services, will likewise be considered to help improve on hospital services and thus, enhance patient care.

Further, more PPP projects for hospitals particularly in regions/provinces where most needed would be encouraged and government programs to bring doctors/medical professionals to rural areas would be improved.

6. Energy

Energy is considered the life-blood of the economy. It is indispensable in achieving economic growth and critical in sustaining a nation’s progress and prosperity. It is an instrument for poverty reduction and social equity as it serves as an enabling factor to channel grassroots development with the delivery of the much needed public services to marginalized and disadvantaged sectors of our society.

The country’s current installed capacity for power generation is 17,025 MW, which is largely located in the Luzon grid. Based on DOE’s 2014-2019 demand-supply projections, an additional 5,100 MW is needed from 2014-2019 in all major grids of the country. The Luzon grid would be needing some 3,800 MW, Visayas grid would need 900 MW, and the Mindanao grid would need 400 MW. As such, the 2014 IPP would encourage investors to put up the necessary additional capacity that would be needed until 2019.

Even as the government promotes the use of renewable and alternative energy, we recognize that fossil fuel remains a dominant source of energy to fuel the economy. Natural gas-fired plants remain the top producers of electricity followed by coal-fired power plants.

It is recognized that the development of a power plant takes a long gestation period, requires big

20Ibid


investments and entails risks. Thus, investors in energy projects are looking for a sound and stable policy and regulatory environment within which they will operate with an attractive business environment. Due to the heavy capital requirements to erect a power plant, generating companies usually rely on lending institutions to supply the needed cash. The lending institutions, on the other hand, look at all the financial support from the government to mitigate the risk of exposure to the project.

The existing plant generating capacity and additional capacity needed on top of the committed capacity to meet the demand and the required reserve margin per major grid is shown below:

Existing Capacity (MW) Additional Capacity Required (MW)Installed Dependable 2014 2015 2016 2017 2018 2019 Total

Luzon 12,528 11,349 600 1,300 400 500 500 500 3,800Visayas 2,448 2,103 0 150 150 250 200 150 900Mindanao 2,049 1,614 300 0 0 0 0 100 400

Total 17,025 15,066 900 1,450 550 750 700 750 5,100Source: DOE Electric Power Industry Management Bureau

Per the DOE, from 2014 to 2019, an additional 5,100 MW of power generating capacity is needed in all major grids of the Philippines. Out of the 5,100 MW required additional capacity, only 45 power generating plants equivalent to 3,382.75 MW (combined RE and conventionally fueled) are committed to go online in 2016.

Major Island grid

Existing Capacity (MW)Additional Capacity

Required (MW)

Committed Additional Capacity(2014 to 2016)

Installed Dependable 2014 to 2019 Capacity(MW)

No of Plants

No. of BOI Registered

Total BOI Registered Capacity

Luzon 12,528 11,349 3,800 1,724.65 19 12 973.6Visayas 2,448 2,103 900 579.60 10 7 293Mindanao 2,049 1,614 400 1,078.50 16 6 318.8

Total 17,025 15,066 5,100 3,382.75 45 25 1,585.4Source: DOE

Still, the committed power plant that will go online in 2016 is not sufficient to address the projected power requirement of the three (3) major grids in 2019. However, investors have provided an indicative additional capacity from (2016 to 2019) of around 13,101.8 MW depending on the market requirements.

Supply Gap/Binding Constraints

Energy security will not be substantially realized if only a small portion of the fuel requirements to run our generating plants is sourced locally. The slow pace of exploration and development of indigenous and other alternative energy sources therefore needs to be addressed. Analyzing the supply chain for geothermal energy, we consider test-drilling during the exploration stage as one ancillary activity to be encouraged. Much of the cost for the development of geothermal energy and also the risks occur during the exploration stage. Common industry practice is that developers outsource the exploration and the test-drilling activities to professional drillers who are better equipped and are more technically capable to do the job to lower their costs and the risks involved.


Based on the DOE data, the geothermal installation targets are as follows:

LocationCommissioning Year

2013-2015 2016-2020 2021-2025 2026-2030Luzon 20 760 20 -

Visayas 20 150 65 60Mindanao - 250 70 20

Total 40 1160 155 80

For the oil and gas, based on the DOE data as of 2011, the potential petroleum resources of the Philippines totalled to 27,905 million of oil initially in place and 53,870 billion cubic feet of gas in place. The estimated recoverable discovered and undiscovered resources include 1,892 million barrels of oil, 10,349 billion cubic feet of gas and 164 million barrels of condensate. These petroleum reserves calculations are based on the sixteen sedimentary basins situated all over the country from the Cagayan Valley Basin in the north down to the Agusan-Davao Basin in the south as well as the prolific Northwest Palawan Basin and the Sulu Sea Basin along the western flank of the archipelago. These basins extend on both offshore and onshore areas. The offshore regions comprise both shallow to deepwater areas for exploration.

Another ancillary activity considered is commercial energy storage that would require the setting up of a battery storage facility. The battery energy storage facility helps ensure the reliability of the power system by stabilizing the supply of electricity in the grid and in meeting peak power demand. Further, with many of our existing power plants getting older and prone to sudden breakdowns or emergency shutdowns, the storage battery serves as a back-up load to avoid power outages. The electricity stored would be the excess electricity produced by power generating plants (RE and non-RE) when demand for electricity in the grid is low.

As mentioned earlier, the energy sector is still heavily reliant on imported fossil fuels like coal and fuel oil. In this connection, intensive efforts to develop the supply of energy crops for biofuels should be exerted. Energy crops could be bunker substitute for many power plants, manufacturing

plants and marine vessels and to ensure the future fuel security of the country. However, the potential diversion of food supply to fuel use has been raised in several international discussions as the cause for increasing food prices. In this connection, it is recommended that cultivation of non-food biomass sources be encouraged and in areas that would not rival food sources. While it may not be discounted that food sources like coconut, sugar and palm could still be used for biofuels, these should already be declared at the outset and should be planted in areas designated by the Department of Agriculture for biofuel crops.

There is a need for a long-term reliable power supply. Private sector investments are relatively low in power generation, exploration and development of other energy resources due to high capital requirement and the 3-5 year gestation period to build a new plant.

Further, there is heavy reliance on imported fossil fuels (coal, fuel oil). Most of the local coal-fired power plant use imported coal with higher British thermal unit (BTU) as fuel to produce electricity. Coal will remain the major fuel for power generation. It is noted though that there is growing opposition to coal-fired power plants due to environmental concerns.

Other constraints identified to power generation include:

· Limited supply of local coal;· Non-suitability of local coal for most coal-fired

power plants (low heating value);· Periodic supply of energy resource (hydro -

limited during summer);


· Limited infrastructure to deliver energy services (grid connection);

· Slow phase in the exploration and development of other potential energy resources (Oil, gas, coal and geothermal);

· Peace and order situation.

Policy Response

The following have been identified as required policy interventions for the energy sector:

· Provision of incentives to power generating plants, drilling services for geothermal projects, commercial energy storage facilities, and plantations of biofuel crops;

· Support the salt fertilization program for existing coconut plantations;

· Review of the EPIRA law.

7. Public Infrastructure and Logistics

a. Transport

Land, water, and air transport or the tri-modal transport system plays a very important role in moving goods and people to various parts of the country as well as to international destinations.

At present, local transport facilities need substantial improvements to support the country’s logistics network. With the Philippines’ archipelagic nature, it is really a challenge to interconnect the more than 7,100 islands in an effective and efficient transportation network.

Employment

The aviation sector supports 123,000 jobs in the Philippines which include jobs that are directly and indirectly supported through the aviation sector’s supply chain and those jobs supported through the spending by the employees of the aviation sector and its supply chain.21

21 http://www.benefitsofaviation.aero/Documents/Benefits-of-Aviation-Philippines-2011.pdf

For the shipping industry, the 2010 Annual Survey of Philippine Business and Industry (ASPBI) records about 17,630 employment for sea and coastal water transport,22 while transportation via buses records about 25,535 employees.23


The key constraints that hinder the growth of the transport sector are the huge capital requirements considering the cost of brand new aircrafts, ships and land/mass rail transport, the high fuel cost determined by global oil markets, the high barriers to exit and foreign equity restrictions. The potential migration of the country’s world-recognized workforce is also high considering that the salaries of pilots, engineers and cabin crews are not competitive as compared with the salaries being offered by other countries.

Further, the presence of maintenance, repair and overhaul services (MRO) for the air transport sector is also necessary while ship repair is also needed by the shipping industry. For the shipping industry, there is a need to retire old ships and modernize vessels, thus the need to have ship repair facilities. In addition, the Philippines has the potential to be an alternative ship repair hub to Singapore.

There are also government policies/ regulations that need to be looked into:

· R.A. No. 9295 (Domestic Shipping Act);· R.A. No. 9301 (Overseas Shipping Act);· Cabotage Law/Foreign equity investment

restriction;· Bareboat Charter Law Restrictions;· Common Carrier’s Tax;· Franchising/ Issuance of CPC;· Bill of Rights for Passengers.

22Release date: January 21, 2013 (http://www.census.gov.ph/content/2010-annual-survey-philippine-business-and-industry-aspbi-transport-and-storage-final

23Ibid.


Other factors that may be considered under binding constraints that prevents the shipping industry to move up the value chain:

· Fuel efficient technology;· Limited port ship calls;· Ocean freight/ fare rates vs. air freight/

fares;· Low cargo volume in some ports;· Ports congestion.

Spillover Effects

The air, land and water transport sector will create opportunities for growth and development for industries such as tourism, logistics and manufacturing industries as well as global supply chains management of goods and services sectors. Data shows that the aviation sector contributes about Php35.5 billion (0.4 percent) to Philippine GDP. This total comprises: (a) Php17.6 billion directly contributed through the output of the aviation sector (airlines, airports and ground services); (b) Php9.7 billion indirectly contributed through the aviation sector’s supply chain; and Php8.2 billion contributed through the spending by the employees of the aviation sector and its supply chain. 24

In addition, there are about Php156.7 billion in ‘catalytic’ benefits through tourism, which raises the overall contribution to Php192.2 billion or 2.4 percent of GDP.

The shipping industry also has a high spillover effects. Data shows, the Philippines, being the world’s leading supplier of seafarers, deployed 365,924 seafarers all over the globe in 2012, serving 25 percent of the total world fleet and likewise remitted a total of US$4.8 billion.25 Most of the agricultural commodities and other products are also being transported through shipping. This creates job opportunities for those small to large businessmen who are engaged into trading of goods, middlemen

24http://www.benefitsofaviation.aero/Documents/Benefits-of-Aviation-Philippines-2011.pdf25FR-PH Maritime Prospects –Challenges, http://gpcci.org/home/wp-content/uploads/2013/05/FR-PH-

Maritime-Prospects-ChallengesGPCCI-5.23.pdf

traders, drivers, and vendors to name a few. In addition to transporting of goods and services, passengers also get to their destination at the least possible cost. The tourism industry likewise benefit from the shipping industry since this is also one of the modes of transportation being used to ferry tourists from one island to another, thus creating job opportunities and new markets.

The land transportation sector likewise creates high spillover effects. Most of the goods transported either through air and water are being distributed to several destinations through land via trucks, buses or rail. Aside from goods, employees, students, businessmen, buyers and sellers also use land transportation in their everyday activities.

Create Competitive Market

The transportation sector is a very dynamic and competitive sector. Competition occurs not only within the mode itself but also across the modes. This is particularly true for inter-island travels in the country. The introduction of comfortable high-speed ferries as a result of the deregulation of the inter-island shipping industry opened up an alternative mode of travel to a market that would previously only consider travel by air. At the same time, the lower airfare offered by recent entrants in the airline industry allowed passengers to have comparative options for travel between air and sea. Prior to the entry of the new carriers, these passengers used to take the boats to travel.26

Likewise, the improvement of roads in Mindanao has significantly reduced travel time by land. Since land travel is a lot cheaper than by air, this development became a source of competition for the air transport industry. An example of this is the Davao-General Santos route of Mindanao Express. As a result of the road improvement in the area, the travel time by land in route was reduced from 6 hours to

26http://pascn.pids.gov.ph/DiscList/d00/s00-12.pdf


2 hours. Thus, load factor was significantly reduced from 90% to 20-30%.27

The air transport industry is also creating competition, not only with the other mode of transportation such as water and land, but also within themselves. An example of this is the increasing number of low cost carriers who would like to increase their market share in the growing tourism industry.

Policy Response

As a support to the said industries, the government may provide the necessary assistance through duty free importation of capital equipment for air, water and land transportation and income tax holiday incentives for airlines and shipping lines. However, only brand new air, water and land transportation should be eligible in order to ensure air and sea worthiness. The requirement for newly acquired vessels is also in support of the vessel retirement program of MARINA in pursuant to the Domestic Shipping Act (R.A. No. 9295).

In addition, the following laws and policies should be looked into:

· Foreign ownership restrictions to help the country attract bigger foreign direct investments most especially on infrastructure projects and development.

· De minimis rule considering that the Philippines has one of the lowest de minimis threshold which is US$0.35.28 Increasing the de minimis threshold will help reduce the compliance costs imposed on importers and accelerate delivery of the merchandise. It will also allow our government to refocus their revenue collection efforts on those parts of the indirect tax base that yield higher net revenue.

· Bill on Customs and Tariff Modernization Act in view of the need to modernize and upgrade customs administration in the

27Ibid. 28https://www.google.com.ph/#q=de+minimis+air+cargo+philippines&safe=active&start=0

country by aligning it with international standards and thereby achieve unanimity in customs procedures with all member states of the World Customs Organization (WCO) which includes the Philippines.29

· Cabotage law30 considering that high local shipping costs may be attributed largely to the absence of competition in the local shipping industry, thus the need for a comprehensive review and amendment of the Philippine Cabotage law.31

· Common Carrier’s Tax for cargo. President Aquino signed last March 2013 RA 10374 exempting foreign carriers tax imposed on foreign airlines and vessels. However, this exemption applies to passengers only and not to cargo.

· Strict implementation of the Domestic Shipping Act, in particular, the Mandatory Vessel Retirement Program and the progressive restriction on ship importation.

· Level playing field on taxes for both domestic and foreign vessels.

· Review MARINA Memorandum Circular on maritime incidents/accidents.

b. Water Supply and Distribution

Water is a basic need and everyone has the right to be provided access to it. In addition, economic growth must be supported, specifically by meeting the needs of priority growth and production centers for water supply.32 Unfortunately, only 80.2% of the Philippine households have access to water. Of the 80.2 percent with access to water from formal providers, only 44 percent are connected to Level 3 (waterworks systems) that are considered the safest and the most convenient sources of water supply. The rest get their water from Level 1 or 2 systems that include protected wells, springs, public faucets, etc.33

29http://www.noodls.com/view4159DB5820A900F85A53079C63A55E53473786B2?904xxx1401267289

30Cabotage law – RA 1937, also known as the Tariff and Customs Code of the Philippines contains provisions that states that maritime transportation of goods and passengers within the country is reserved for Philippine registered marine vessels.

31 http://www.pids.gov.ph/index2.php?pr=16232 http://www.neda.gov.ph/wp-content/uploads/2013/09/CHAPTER-5.pdf33http://dirp4.pids.gov.ph/webportal/CDN/PUBLICATIONS/pidspn1316.pdf


There are approximately 5,400 water service providers in the country based on latest available information.34 In Metro Manila, Maynilad Water Services, Inc. (Maynilad) and Manila Water Corporation (Manila Water), are the contracted water providers. Outside Metro Manila, the 831 local water districts registered with the Local Water Utilities Administration (LWUA) are the major water service providers. The local government units (LGUs) and community-based organiza tions (CBOs) remain to be the biggest provider serving 55 percent of those with access to water, followed by the water districts at 20 percent and private operators at 5 percent. The informal sources pro vide water to the remaining 20 percent of the population. While the formal providers are required to meet national water quality standards, no such oversight exists for the informal providers.35

Employment

The water sector industry generate high employment rate. In 2009, the employment generated for purification and distribution of water is 25,510, with additional 1,067 workers for steam and hot water supply.36 Forward linkages include the construction and real estate industry, agriculture and manufacturing industries. Backward linkages include suppliers of water, pipes, distribution systems, water treatment, among others.


One of the major constraints to the development of the sector is the lack of new sources of water. Unless new water sources are developed, the Philippines may face a water crisis over the next 10 years due to its growing demand. Among the urban centers where severe water shortage could be experienced by 2024 were Metro Manila, Cebu, Davao, Baguio, and Angeles.37 In addition, there

34Sector overview of the Philippine water supply sector roadmap (http://dirp4.pids.gov.ph/webportal/CDN/PUBLICATIONS/pidspn1316.pdf)

35http://dirp4.pids.gov.ph/webportal/CDN/PUBLICATIONS/pidspn1316.pdf36http://www.census.gov.ph/content/2009-annual-survey-philippine-business-and-industry-aspbi-

electricity-gas-and-water-supply37http://www.interaksyon.com/business/57541/water-crisis-to-hit-philippines-in-10-years-if-no-new-

are still 432 identified waterless barangays and municipalities that need water service providers.38

Likewise, there is low government budget allocation for water infrastructure. Of the total water infrastructure budget of Php97.3 million (22 percent), only Php3.7 billion (3.8 percent) was al located for water supply and the rest going to irrigation and flood control.39

In addition, huge capital requirements, foreign nationality restrictions, high barriers to exit and the non-revenue water concerns have been identified as barriers to new entrants. The following policy related constraints are also notable:

· Prospective investors in the water supply sector have noted the lack of an economic regulator and the inadequate capacity and resources of the current resource regulator. This discourages foreign investors from entering the field. The absence of an independent regulator forced the Metropolitan Waterworks and Sewerage System (MWSS), Manila Water, and Maynilad to establish one by contract. While the arrangement is novel and apparently works, establishing an independent regulator via legislation will afford greater comfort and long-term stability.40

· Weak enforcement of water-related laws such as Clean Water Act, etc.

· Different tariff structures/ methodologies. Tariff levels are not sufficient for the majority of the Water Service Providers to recover recurrent costs and accumulate sufficient reserves to fund new capital developments.41

· Franchise/CPC· Other constraints pertain to the following

issues:- Water pollution- Climate change- Low performance of water utilities

sources-are-tapped-expert-says38Philippine Water Supply Sector Roadmap 2nd Edition, 2010 National Economic Development Authority39Executive Summary, xvi, Philippine Water Supply Sector Roadmap 2nd Edition40http://www.investphilippines.info/arangkada/wp-content/uploads/2011/06/14.-Part-3-Seven-Big-

Winner-Sectors-Infrastructure-Water.pdf 41Philippine Water Supply Sector Roadmap 2nd Edition, 2010 National Economic Development Authority


- Limited access to financing- Rapid population growth

Spillover Effects

Since water is a basic need, it is expected to have high spillover effects as the availability of water supply in an area contributes to its fast growth and development. It is actually one of the major services being considered by any investor or locator in their business decisions. With the availability of the necessary services/ utilities in the vicinity such as electricity, telecommunication, and water supply connections, the construction of residential houses, commercial and industrial businesses follow, if not preceded by water supply thus increasing the economic activity and employment generation in that given area.

Policy Response

To address the above constraints and gaps, the following have been considered as the required interventions:

· Provision of incentives to new projects utilizing new water sources and those that will cater to any of the identified waterless barangays and municipalities.

· Creation of a separate and independent Water Regulatory Commission.

· Promotion of Private Sector Participation/Joint Ventures.

· Tapping Official Development Assistance (ODA) as complementary funding sources

· Harmonization of tariff setting/methodologies.

c. Industrial Waste Treatment

With the current efforts on reviving the manufacturing sector, it is expected that there will be an increase in the generation of industrial wastes, which could include residuals after a manufacturing process in factories, mills and mines. Industrial wastes could be hazardous or non-hazardous depending on the product being

manufactured or process used. These wastes could include chemical solvents, radioactive wastes, colorants, metallic substances, paper products, and other industrial by-products.

While sewage plants can treat some industrial wastes, i.e. those consisting of conventional pollutants such as biochemical oxygen demand (BOD), industrial wastes containing toxic pollutants would require specialized treatment systems and thus, special treatment facilities will have to be established to handle the treatment and disposal of such wastes. At present, there are no known commercial treaters of industrial wastes. Some companies would have in-plant storage facilities for wastes, especially, hazardous wastes but none really for treatment and proper disposal. In this connection, investments in industrial wastes treatment facilities would be encouraged. These activities would also add to the employment opportunities to our engineering and environmental professionals and contribute to the environmental protection initiatives of the government for sustainable development.

---oOo---


2 . A D B ’ S T O P 2 0 “ N E A R B Y ” P R O D U C T SB A S E D O N S O P H I S T I C A T I O N L E V E L

A N D L A B O R I N T E N S I T Y

Table 1. Top 20 commodities based on Level of Sophistication (PRODY)SITC Code Commodities PRODY Strategic Value

6664 Porcelain or china houseware 11,998 10,0398952 Pens, pencils, and fountain pens 10,829 9,7956531 Fabrics, woven, of continuous synthetic textile material 14,843 9,480

7243 Sewing machines, furniture, needles, etc and parts thereof 11,250 9,035

7757 Domestic electromechanical appliances; and parts thereof, n.e.s. 10,866 8,559

7641 Electrical line telephonic and telegraphic apparatus 14,713 8,3467512 Calculating, accounting, cash registers, ticketing, etc 13,485 8,1997643 Television, radio-broadcasting; transmitters, etc 16,537 8,103

7642 Microphones; loudspeakers; audio-frequency electric amplifiers 13,583 7,997

612 Refined sugar, etc. 12,595 7,5398852 Clocks, clock movements and parts 15,040 7,2738981 Pianos, other string musical instruments 11,293 6,9618973 Precious jewelry, goldsmiths’ or silversmiths’ wares 12,091 6,9528851 Watches, watch movements and case 25,310 6,014350 Fish, dried, salted or in brine; smoked fish 13,841 5,650

8811 Photographic cameras, flashlight apparatus, parts, accessories, n.e.s. 17,702 5,488

344 Fish fillets, frozen 13,286 5,413814 Flours and meals, of meat, fish, etc 11,284 4,220

7622 Portable radio receivers 13,995 3,8087522 Complete digital processing machines 28,109 3,403


Table 2. Top 20 “nearby” products with highest labor intensity

SITC Code Commodities Labor intensity

6674 Synthetic or reconstructed precious or semi-precious stones 16.1778981 Pianos, other string musical instruments 8.981

6552 Knitted, not elastic nor rubberized, of fibers other than synthetic 4.594

8952 Pens, pencils and fountain pens 3.547

8998 Smallwares and toilet articles, n.e.s.; sieves; tailors’ dummies, etc. 3.547

6531 Fabrics, woven, of continuous synthetic textile materials 3.0658852 Clocks, clock movements and parts 2.9828973 Precious jewelry, goldsmiths’ or silversmiths’ wares 2.9828851 Watches, watch movements, and case 2.9826664 Porcelain or china houseware 2.829

8811 Photographic camera, flashlight apparatus, parts, accessories, n.e.s. 2.042

350 Fish, dried, salted or in brine; smoked fish 1.611344 Fish fillets, frozen 1.611

7243 Sewing machines, furniture, needles, etc and parts thereof, n.e.s. 1.392

7522 Complete digital data processing machines 1.3477641 Electrical line telephonic and telegraphic apparatus 1.1937643 Television, radio-broadcasting and telegraphic apparatus 1.193814 Flours and meals, of meat, fish, etc. 1.022

7642 Microphones, loudspeakers, audio-frequency electric amplifiers 0.9577622 Portable radio receivers 0.957

Notes: 1. Nearby products are products that can be developed with relative ease since they can intensively utilize existing capabilities embedded in the current export structure.2. PRODY is an indication of a product’s level of sophistication, measured by the average of GDP per capita of exporting countries of the product.

Source (Table 1 and Table 2): Usui, Norio. 2012. Taking the Right Road to Inclusive Growth. Asian Development Bank. Manila, Philippines.


3 . O U T P U T M U L T I P L I E R S , I N C O M E M U L T I P L I E R S , E M P L O Y M E N T M U L T I P L I E R S ,

A N D P R O D U C T I O N L I N K A g E S

Industry

Total Domestic Output

Multiplier1 (additional domestic

output per peso change

in final demand)

Total Domestic Income

Multiplier1 (additionaldomestic household income per

peso change in final demand)

Total Domestic Employment

Multiplier Effect1

(additional domestic jobs per one billion peso change in final demand)

Backward Linkage2 Forward Linkage2

Strength (relative to other

industries)

Dispersion (relative to other

industries)


industries)


industries)

Manufacturing

Auto Manufacturing 2.34 0.24 1,134 weak even weak uneven

Auto Parts 2.12 0.20 945 weak uneven weak uneven

Motorcycle 2.37 0.27 1,276 weak even weak uneven

Basic Chemicals 2.13 0.24 1.134 weak uneven strong even

Bamboo 1.61 0.20 945 weak uneven strong even

Biodiesel 1.32 0.08 378 weak uneven strong even

Cement 2.29 0.25 1,181 weak even weak even

Ceramic Tiles 2.59 0.40 1,890 strong even weak uneven

Copper and Copper Products

Non-ferrous smelting, refining plants, rolling, etc.

1.98 0.16 756 weak uneven strong even

Non-ferrous foundries 2.24 0.24 1,134 weak uneven strong even

Electrical machinery 1.75 0.17 803 weak uneven weak uneven

Furniture

Wooden 2.55 0.30 1,418 strong even weak uneven

Rattan 2.66 0.39 1,843 strong even weak even

Other Furniture 2.77 0.36 1,701 strong even weak even

garments and Textile 2.16 0.21 992 strong uneven strong even

Iron and SteelBlast furnace and

steel making furnace, etc.

2.14 0.17 803 weak uneven strong even

Iron and steel foundries 2.38 0.21 992 weak even weak uneven


Industry



output per peso change in final demand)

Total Domestic Income Multiplier1

(additionaldomestic household

income per peso change in final

demand)


Multiplier Effect1

(additional domestic jobs per one billion peso change in final

demand)



industries)


industries)


industries)


industries)

Metal Casting 2.07 0.18 851 strong even weak even

Plastics 2.04 0.22 1,040 weak uneven strong even

PaperPulp, paper,Paperboard 2.19 0.20 945 weak uneven strong even

Paper and paperboard containers

2.19 0.26 1,229 weak uneven weak even

Articles of paper 2.06 0.20 945 weak uneven weak even

Semiconductor devices 2.21 0.31 1,465 weak uneven weak uneven

Shipbuilding 2.29 0.21 992 weak even weak uneven

Services

Air Cargo 2.42 0.24 1,134 strong even weak evenInformation

Technology-Business Process Management

2.78 0.52 2,457 strong even weak uneven

Private business services 2.39 0.36 1,701 strong even strong even

Private recreational services


Mass Housing 2.69 0.43 2,032 strong even strong even

Medical TravelPrivate medical, dental, other health services


Other hospital activities, medical and dental practices, vet.

1.97 0.27 1,276 weak uneven weak uneven


Industry



output per peso change in final demand)

Total Domestic Income Multiplier1

(additionaldomestic household

income per peso change in final

demand)


Multiplier Effect1

(additional domestic jobs per one billion peso change in final

demand)



industries)


industries)


industries)


industries)

Agribusiness: Food ProcessingSlaughtering

and meat packing

3.23 0.41 1,937 strong even strong even

Meat and meat products processing

3.45 0.37 1,748 strong even weak even

Milk processing 2.47 0.23 1,087 strong uneven weak evenCanning and preserving of

fruits2.57 0.31 1,465 strong even weak even

Mining

Copper mining 2.16 0.26 1,229 weak uneven weak uneven

gold mining 2.07 0.24 1,134 weak uneven weak even

Chromite mining 2.12 0.29 1,370 weak uneven weak uneven

Nickel mining 2.03 0.26 1,229 weak uneven weak unevenOther metallic

Mining (silver, etc)

1.89 0.23 1,087 weak uneven weak uneven

Notes:1“The total domestic output, income, and employment multiplier effects incorporate the initial, direct, indirect, and induced effects. The total domestic output and income multipliers were derived from a semi-closed domestic inverse

matrix. The total employment multiplier effect is derived by dividing the total domestic income multiplier effect by the annual average compensation. The annual average compensation used in this study is 211,615 pesos. This was based on the 2010 Annual Survey of Philippine Business and Industry.” (Terosa, 2013, Sec. III).

2“The relative strength of the production linkages of an industry is considered strong if the corresponding linkage index is greater than 1. If the linkage index of the industry is less than 1, the relative strength of its production linkages is considered weak. The relative dispersion of production linkages is deemed even if the coefficient of variation of the industry is less than the average coefficient of variation for all industries. Otherwise, the relative dispersion of production linkages is considered uneven.” (Terosa, 2013, Sec. IV).

Source: Terosa, C. L. (2013). Multiplier Effects and Production Linkages in 2000 of Selected Industries in the Philippines. Report submitted to the United States Agency for International Development – Advancing Philippine Competitiveness Project (USAID-COMPETE), for the Department of Trade and Industry.


4 . R E F E R E N C E S

Aldaba, Rafaelita. (forthcoming) “Surviving Trade Liberalization in Philippine Manufacturing. ” ERIA Discussion Paper. Economic Research Institute for ASEAN and East Asia.

Blomstrom, Magnus and Ari Koko. 2003. “The Economics of Foreign Direct Investment Incentives” in Herrmann, Heinz and Robert Lipsey (eds.) Foreign direct investment in the real and financial sector of industrial countries. Heidelberg and New York: Springer.

Botman, Dennis, Alexander Klemm, and Reza Baqir. 2008. Investment Incentives and Effective Tax Rates in the Philippines: A Comparison With Neighboring Countries. IMF Working Paper 08/207. International Monetary Fund.

Klemm, Alexander and Stefan van Parys. 2009. “Empirical Evidence on the Effects of Tax Incentives.” IMF Working Paper 09/136. International Monetary Fund.

KPMG International. 2014. Corporate tax rate table. Retrieved from http://www.kpmg.com/global/en/services/tax/tax-tools-and-resources/pages/corporate-tax-rates-table.aspx

Lin, Justin. 2011. “New Structural Economics: A Framework for Rethinking Development.” Policy Research Working Paper Series 5197, The World Bank.

Lin, Justin and Ha-Joon Chang. 2009. “Should Industrial Policy in Developing Countries Conform to Comparative Advantage or Defy it? Development Policy Review, Overseas Development Institute, vol. 27(5), pages 483-502, 09.

Manasan, Rosario G., 2002, “Explaining the Decline in Tax Effort,” PIDS Policy Note No. 2002−14 (Makati City: Philippine Institute for Development Studies).

Morisset, J. and N. Pirnia. 2001. How tax policy and incentives affect foreign direct investment: a review. In Wells, L. Jr., N. Allen, J. Morisset and N. Pirnia. 2001. Using tax incentives to compete for FDI: are they worth the costs? Foreign Investment Advisory Service Occasional Paper No. 15. Washington, DC: World Bank.

Nakayama, Kiyoshi, Selcuk Caner and Peter Mullins. 2011. Road Map for a Pro-Growth and Equitable Tax System. Washington, D.C.: International Monetary Fund.

National Economic and Development Authority. 2011. Philippine Development Plan: 2011-2016. Pasig: NEDA.

National Economic and Development Authority. 2014. Philippine Development Plan: 2011-2016 Midterm Update with Revalidated Results Matrix. Pasig: NEDA.

Reside, R. 2006. Fiscal incentives and investments in the Philippines. Report for the Economic Policy Reform and Advocacy Project of the USAID and Ateneo de Manila University.

Terosa, C. L. 2013. “Multiplier Effects and Production Linkages in 2000 of Selected Industries in the Philippines,” Report submitted to the United States Agency for International Development – Advancing Philippine Competitiveness Project (USAID-COMPETE), for The Department of Trade and Industry.

Usui, Norio. 2012. Taking the right road to inclusive growth: Industrial upgrading and diversification in the Philippines. Mandaluyong City, Philippines: Asian Development Bank.


PHOTODevelopment

PHOTODevelopment


MEMORANDUMCIRCULAR NO. 2015- 01

gENERAL POLICIES AND SPECIFICgUIDELINES TO IMPLEMENT THE

INVESTMENT PRIORITIESPLAN (IPP) 2014 - 2016


A . P R E F A T O R Y S T A T E M E N T

In line with the Administration’s thrust of creating a more dynamic and progressive Philippines, the President issued Memorandum Order No. 74 dated 28 October 2014 approving the 2014 Investment Priorities Plan (IPP), which is centred on the theme “Industry Development for Inclusive Growth.” A fundamental investment policy tool of the DTI-BOI’s industry development strategy, the 2014 IPP is a strategic plan to grow industries, not just or necessarily through incentives, but through other policy interventions and initiatives. The IPP undertakes to address the most binding constraints to the entry of new investments and moving up the value chain to enhance the local industries’ competitiveness while creating a competitive market.

The 2014 IPP is a rolling three-year plan to ensure continuity, consistency and predictability – factors seriously considered by domestic and foreign investors. This new IPP will, however, be reviewed annually over the three-year period.

Therefore, notice is hereby given that the Board approved the following General Policies and Specific Guidelines to implement the 2014 IPP.


B . g E N E R A L P O L I C I E S

I. APPROVAL OF APPLICATION AND ENTITLEMENT TO INCENTIVES

The approval of application for registration and entitlement to incentives under this IPP is subject to Article 7, paragraph 3 of Executive Order (E.O.) No. 226.

The approval of applications for registration shall be based on the IPP listing. However, the extent of entitlement to incentives shall be based on the project’s net value-added, job generation, multiplier effect and measured capacity.

The BOI, if national interest requires, may deny registration of projects engaged in the export of a product including industry inputs that are in short supply domestically.


II. EQUITY OWNERSHIP

Except as provided for under the Constitution and the Foreign Investments Act of 1991 (Republic Act No. 7042, as amended), there are no restrictions on foreign ownership of export-oriented and/or pioneer enterprise that will engage in the activities listed in the IPP.

III. EQUITY REQUIREMENT

The minimum equity of the project applied for registration is 25% of the project cost unless exempted under any of the following:

1. Projects of applicants with good track record in implementing registered projects;

2. Projects of publicly-listed companies; or3. Projects not entitled to ITH.

For projects with a gestation period of more than three (3) years, the 25% equity requirement shall be based on the annual capital requirement of the project; Provided that the total equity requirement of 25% is complied with on the first year of ITH availment. Non-compliance with this policy shall result in forfeiture of ITH incentives for the taxable year.

For multi-phase projects, the 25% equity requirement shall be based on the annual capital requirement of each phase; Provided that the total equity requirement for the first phase is complied with on the first year of ITH availment; and the corresponding cumulative equity requirement for the succeeding phases is complied with on the first ITH availment of each succeeding phase thereafter. Non-compliance with this policy shall result in forfeiture of ITH incentives for the taxable year.

IV. PROJECT STATUS

Pioneer status with pioneer incentives shall be governed by Article 17 of E.O. 226.

V. gEOgRAPHICAL CONSIDERATION IN INDUSTRY DEVELOPMENT POLICY

The BOI shall include geographical considerations in evaluating projects to be qualified for incentives based on, among others, regional development plans, industry roadmaps, industry clustering strategies and other relevant government initiatives to fill in the gaps of supply chains, enhance competitiveness, and promote global value chains.

A. Regional Dispersal of Industries

The dispersal of economic activities to the countryside is encouraged.

Projects in any of the identified less developed areas (LDAs) listed in Annex A shall be entitled to pioneer incentives and additional deduction from taxable income equivalent to 100% of expenses incurred in the development of necessary and major infrastructure facilities unless otherwise specified in the Specific Guidelines.

B. Locational Restriction in NCR

The BOI shall limit incentives to firms that locate in congested urban centers. The locational restriction applies to the National Capital Region (NCR) wherein projects are not entitled to ITH. Exemption from the above locational restriction, however, may be given to the following:

1. Projects in government industrial estates1 declared by national law or presidential proclamation prior to 01 January 1989 (unless subsequently privatized);

2. Projects that will engage in service type activities;

1 Government Industrial Estatesa) Dagat-Dagatan (P.D. No. 569 dated 30 October 1974)b) Vitas Industrial Estate, Tondo (E.O. No. 1086 dated 31 January 1986, as amended/expanded through

Presidential Proclamation No. 39 dated 09 September 1992 and Proclamation No. 465 dated 01 August 1994) (Vitas Industrial Estate/Smokey Mountain)

c) Bagong Silang Industrial Estate, Caloocan City (Presidential Proclamation No. 843 dated 26 July 1971)d) Food Terminal Inc., Taguig (LOI No. 900 dated 25 July 1979)e) Navotas Fishing Port Complex (E.O. No. 772 dated 08 February 1982)


3. Expansion of export-oriented projects effected within the firm’s existing premises; and

4. Modernization projects.

VI. EXPORT OF PRODUCTS IN SHORT DOMESTIC SUPPLY

The export commitment of a registered enterprise may be suspended to satisfy national interest or in an emergency situation.

VII. ITH AVAILMENT

A. general Rules

1. In the grant of incentives, the Board shall give priority to projects with substantial benefits to the economy. In this regard, the extent of the project’s ITH entitlement shall be based on the following parameters: (1) project’s net value added, (2) job generation, (3) multiplier effect, and (4) measured capacity.

In the event that the registered enterprise fails to implement the project as represented in its project application, the Board may opt to reduce the project’s ITH availment proportionate to the actual performance (e.g. investments, employment generation, production and sales, timetable) of the enterprise.

The income qualified for ITH shall be limited to the income directly attributable to the eligible revenue generated from registered project.

2. Except for renewable energy projects, the basis of net income qualified for ITH shall be limited to the 110% of the projected gross revenues as represented by the firm in its application for registration.

In cases where the project’s actual revenues exceed the projections in its application due to, e.g., new markets/orders, additional employment/shifts, additional investments, the Board may increase the project’s ITH availment proportionately. Request/s for adjustments of projected revenue must be filed before the projected revenue is exceeded, otherwise ITH on the excess revenue (i.e. in excess of 110% of the projected gross revenue) shall not be granted.

3. ITH shall only be applicable to revenues on sales generated/services rendered to other enterprises. For projects involving services inherent to a project’s operation (e.g. air cooling and similar activities), entitlement to ITH shall be subject to the condition that 70% of the revenues are generated from non-related entities and service fees are within normal/ regular rates.

4. Only net income from operation of registered activity as certified under oath by CEO or CFO shall be entitled to ITH.

5. Enterprises with multiple registrations with the Board and/or several activities (whether BOI-registered or not) shall submit a list of cost items that are common with the qualified project and their cost allocation methodology for the said cost items, to ensure proper, fair and equitable allocation of common cost such as overhead and administrative costs.

B. Base Figure and Rate of Exemption

In general, ITH of expansion projects are subject to a base-figure equivalent to the enterprise’s highest sales volume in case of homogenous products or sales value in case of heterogeneous products, in the last three (3) years, prior to the filing of the application for registration of the project.


Projects registered under the modernization program without increase in capacity may be entitled to three (3) years ITH and other incentives without prejudice to compliance with other requirements. The computation of ITH for projects without increase in capacity is as follows:

For single product/activity:

New Investment (in US$)Rate of Exemption (ROE) = ---------------------------------------------------- x 100 Total Investments (replacement cost + new) Relative to the Concerned Plant (in US$)

For multiple products/ activities or when ITH period of other products/ activities has lapsed:

Sales arising from the modernization project% Sales Entitled to ITH = ------------------------------------------------------- x 100 Total Sales

New Investment (in US$)ROE = ---------------------------------------------------- x 100 Total Investments (replacement cost + new) Relative to the concerned plant (in US$)

Where:• ROE shall be fixed for the ITH entitlement period.• Exchange rate shall be the existing rate at the time of actual investment or time of availment of ITH

whichever will result in lower rate of ITH.• Replacement cost shall refer to the appraised value of its Fixed Assets relative to the concerned plant

in the first year of ITH availment duly assessed and certified by an Independent Appraiser accredited by the Bangko Sentral ng Pilipinas. This shall thereon be used as a basis in succeeding ITH availments until the end of the ITH entitlement period of the project.

• % Sales Entitled to ITH shall be based on actual sales values for the year of availment.

C. Availment of ITH Bonus Year

New registered pioneer and non-pioneer enterprises and expansion enterprises granted pioneer incentives under Art. 40(a) of E.O. 226 may be granted one (1) additional year of ITH incentive for each of the following criterion:

1. Capital Equipment to Labor Ratio Criterion

a) Formula:

Derived $ cost of capital equipment ≤ US$10,000.00 Average number of direct labor

b) The acquisition cost of the machinery and equipment pertaining to the registered activity covering the taxable year immediately preceding the period applied for extension and not the depreciated cost shall be used and, in converting the value of equipment from pesos to dollars, the average foreign exchange rate at the time of acquisition shall be used.


c) The direct labor count shall represent an average of the month end labor count for the same taxable year as represented in b.

d) On the year of the actual availment of the ITH bonus year, the firm must still comply with the capital equipment to labor ratio criterion to be entitled to it.

2. Net Foreign Exchange Earnings/Savings Criterion

a) Foreign Exchange Earnings is the total foreign exchange proceeds from the export of the registered product or services while Foreign Exchange Savings is the local sales of the registered product (must be justified as an import substitute) equivalent to the foreign exchange costs of the said product had these been imported.

b) The export sales/local sales of import substitutes or the derived average foreign exchange earnings/savings less the foreign exchange costs/expenses for the first three years of commercial operation should at least be US$500,000.00.

c) Foreign exchange costs/expenses include imported raw materials, imported supplies/spare parts, depreciation of imported machinery/equipment, among others.

3. Indigenous Raw Material Cost Criterion

a) Formula:

Cost of Indigenous Raw Materials x 100% ≥ 50% Total Cost of Raw Materials

b. Indigenous Raw Materials and/or intermediate indigenous products must be used as inputs in the manufacturing or processing of the registered product. The derived ratio should not be lower than fifty percent (50%) for each taxable year beginning the start of commercial operation up to when the extension using this criterion was applied for.

c. Lists of indigenous raw materials and Intermediate indigenous products are provided in Annex B.

d. On the year of the actual availment of the ITH bonus year, the firm must still comply with the indigenous raw material cost criterion to be entitled to it.

D. Projects with government guarantee

Projects with government guarantee/subsidy are not entitled to ITH except in cases where ITH has been considered in the rates/tariffs approved by the regulatory agency concerned.

The ITH is deemed to have been imputed in the grant of the government guarantee/subsidy if the ITH was

incorporated in the bid documents of the project proponent/contract with government on the project, or the ITH was included in the financial model by the regulatory agency in approving the project’s tariffs/rates. The latter case is particularly applicable to power projects and thus, subject to a certification by the Energy Regulatory Commission (ERC).


VIII. MULTI-PHASE PROJECTS

Projects of an enterprise with multiple phases/locations may be registered on a per phase/location.

IX. INCLUSIVE BUSINESS

Registered enterprises are encouraged to adopt the Inclusive Business (IB) strategy that provides: a) goods and services; and b) income and decent work opportunities for the low-income segment of the society within the enterprise’s supply or value chain directly contributing to the improvement of living standards and poverty reduction.

The IB strategy of the registered enterprise may be accredited by the Board subject to the guidelines that will be issued by the Board separately.

X. CORPORATE SOCIAL RESPONSIBILITY

(CSR)

BOI registered entities, recognizing the benefits derived from the fiscal incentives granted by the government, should endeavour to undertake meaningful and sustainable CSR projects in the locality where the projects are implemented.

XI. gOOD CORPORATE gOVERNANCE

BOI registered enterprises must be committed to the tenets of Good Corporate Governance. Boards must function properly in decision-making processes that affect their stakeholders.

XII. SUPPORT TO ENVIRONMENTAL PROTECTION AND CONSERVATION

Registered enterprises shall adopt measures intended to reduce climate change risks in support of the National Framework Strategy on Climate Change.

Likewise, registered enterprises are encouraged to implement best practices to protect and conserve biodiversity in their respective area and/or activities, and promote biodiversity-friendly businesses.

New and expansion projects shall be required to secure an Environmental Compliance Certificate (ECC) pursuant to P.D. No. 1586 (Philippine Environmental Impact Statement System) and other clearances under relevant environmental laws.

A Certificate of Non-Coverage (CNC) issued by the Environmental Management Bureau (EMB) shall be submitted for projects that are not critical to the environment.

Applicants for BOI registration must submit proof of application for ECC/CNC filed with DENR.

Registered enterprises are encouraged to participate in the Philippines’ Eco-labeling Program (ELP), when applicable.

Registered enterprises are encouraged to secure environmental certifications based on internationally-recognized standards, whenever applicable.


XIII. INTERNATIONAL STANDARDS CERTIFICATION

Registered enterprises shall obtain applicable certifications based on internationally-recognized standards such as a Hazard Analysis and Critical Control Points (HACCP), ISO certification, quality standards (e.g. ICC, CE) or other similar certifications.

XIV. EQUIPMENT

Registered enterprises shall use brand new equipment except for projects utilizing consigned equipment, projects involving transfer of facilities, when specified in the Specific Guidelines, and apply production processes that meet environmental standards. Application for availment of capital equipment incentive shall be filed prior to the ordering of equipment.

XV. PROJECTS IN THE AUTONOMOUS REgION IN MUSLIM MINDANAO (ARMM)

The ARMM List covers priority activities that have been identified by the Regional Board of Investments of the ARMM (RBOI-ARMM) in accordance with E.O. No. 458. The RBOI-ARMM may also register and administer incentives to activities in this IPP for projects locating in the ARMM.

Projects in the ARMM should register with the BOI-ARMM.

XVI. PROJECTS WITH REVENUES DERIVED FROM CARBON CREDITS PURSUANT TO THE KYOTO PROTOCOL

Revenues from the sale of carbon credits through certified emission reduction (CER) units generated from registered activity may be considered as part of the income entitled to ITH, provided that the enterprise made representation at the time of application for registration that such projects would earn CER units.

XVII. OUTSOURCINg OF PRODUCTION PROCESS OR SERVICES

Portion/s of the production process or services of the registered activity may be outsourced provided that the core activity or the integrated nature of operation is undertaken by the registered enterprise.

XVIII. PUBLIC WELFARE CONSIDERATION

The BOI may deny applications for registration and/or grant of incentives for reasons of public health or morals or for environmental considerations.


C . D E F I N I T I O N O F T E R M S

a) Alternative Fuel Vehicles – refer to vehicles that run on electric batteries, flexible fuels, hybrid systems.

b) Book - a printed non-periodical publication of at least forty-eight (48) pages, exclusive of cover pages, published in the country and made available to the public.

c) Content Development of Books consists of the following:

(1.) Development of new technologies directly related to book printing or publishing, such as but not limited to digitization, electronic books (E-books), internet-based archiving and retrieval systems, electronic content creation and development systems, educational and/or “how-to” audio-visual presentations with or without interactive segments, and the like.

(2.) Research and development activities directly related to book printing or publishing, such as but not limited to translation, editing, analysis and/or interpretation of text and materials into local dialects or adaptation/application to the domestic setting.


d) Copy – refers to the certified true copy of the original document.

e) Distribution - refers to bunkering and fuel shipping and transport. Fuel shipping and transport cover shipping and transport through land such as tank trucks, lorries and pipeline and tankers, and barges for the fuels to get to the points or areas where they are needed. Bunkering covers the activity of selling fuel for direct use by a vessel, usually for water and air transport, through a smaller transport vessel. Distribution projects are limited to those acquiring brand new equipment.

f) Electric vehicles - refer to vehicles that run solely on electric power.

g) Energy crops - refer to plants that may be used as feedstock for biofuels and/or power generation. These include grass, bamboo, leguminous tree species, sugarcane, sweet sorghum, cassava, algae, coconut, and oil palm and other crops as may be identified by the DOE.

h) Existing Project – refers to a project of an existing enterprise that has started commercial operation at the time of application with the Board.

i) Expansion Project – refers to a project of an existing enterprise that would involve the installation of additional facilities/equipment that will result in increase in capacity of the same/similar activity within the same existing plant/facilities of the enterprise. Projects that do not qualify as new shall be considered as expansion.

j) Flexible-fuel vehicles – refer to vehicles that run on gasoline/diesel in combination with alternative fuel such as but not limited to:• Bioethanol vehicles that run on gasoline

and a minimum ethanol content/blend of at least 20%

• Biodiesel vehicles that run on diesel and a minimum biodiesel blend/content of at least 5%

• Compressed Natural Gas Vehicles are vehicles that run on Compressed Natural Gas (CNG)

• Other vehicles powered by LPG, fuel cell and other alternative fuels.

k) general Hospital – refers to a hospital with Levels 1, 2 or 3 that provides services for all kinds of illnesses, diseases, injuries, or deformities. It shall provide medical, surgical, maternity, newborn, and child care. It shall employ Board-certified/eligible medical specialists and other licensed physicians.

l) general Hospital Level 1 – refers to a hospital that has the following:• Staff of qualified medical, allied medical

and administrative personnel headed by a physician duly licensed by Professional Regulation Commission (PRC);

• Operating room with standard equipment and provision for sterilization of equipment and supplies;

• Post-operative recovery room;• Maternity facilities consisting of ward(s),

room(s), a delivery room, exclusively for maternity patients and newborns;

• Isolation facilities with proper procedures for the care and control of infections and communicable diseases;

• Separate dental section/clinic;• Blood station;• DOH licensed secondary clinical

laboratory with the services of a consulting pathologist;

• DOH licensed level 1 imaging facility with the services of a consulting radiologist;

• DOH licensed pharmacy.

m) general Hospital Level 2 – refers to a hospital that has, as minimum, all of Level 1 capacity including the following:• An organized staff of qualified and

competent personnel with Chief of Hospital/Medical Director and appropriate Board-certified Clinical Department Heads;

• General ICU for critically-ill patients;


• Provision for Neonatal Intensive Care Unit (NICU);• Provision for High Risk Pregnancy Unit (HRPU);• Provision for respiratory therapy services;• DOH licensed tertiary clinical laboratory;• DOH licensed level 2 imaging facility with mobile x-ray inside the institution and capability for contrast

examinations.

n) general Hospital Level 3- refers to a hospital that has, as minimum, all of Level 2 capacity including the following:• Teaching and/or training hospital with accredited residency training program for physicians in the four

(4) major specialties namely: Medicine, Pediatrics, Obstetrics and Gynecology, and Surgery;• Provision for physical medicine and rehabilitation unit;• Provision for ambulatory surgical clinic;• Provision for dialysis facility;• Provisions for blood bank;• DOH licensed tertiary clinical laboratory with standard equipment/reagents/supplies necessary for

the performance of histopathology examinations;• DOH licensed level 3 imaging facility with interventional radiology.

o) government guarantee – refers to the rate of return granted by the regulating agency to include profit and the recovery of capital expenditure (guaranteed rate of return), assured payment whether or not services/product were produced/delivered (take or pay provision), and assurance to lender by a government agency that a financial obligation will be honored even if the borrower is unable to repay the debt.

p) government Subsidy - refers to the financial contribution by the national government or any of its agencies to defray, pay for or shoulder a portion of the project cost or the expenses and costs in operating or maintaining the project.

q) Inclusive Business – are those profitable core business activities that deliberately target the low-income segment (below US$3/day) as part of their value proposition. IB creates or expands access to goods, services, and livelihood opportunities for the poor and vulnerable in commercially viable and scalable way.

r) Integrated Circuit – refers to a semiconductor device that holds a number of electronic components that are internally connected to form a larger electronics circuit which can operate either using analog or digital technology.

s) Logistics Efficiency Index – refers to the measure of cost efficiency of the logistics involved in the supply of motor vehicle parts and components for the enrolled Model. It is computed as follows:

LEI = Nf - Na Where: Na = annual volume of imported parts (m3) Nf – Nt

total annual production (units) Nf = total m3 of parts for one complete vehicle Nt = total m3 of part/unit that are deemed too technology- or investment-intensive and that cannot be viably manufactured in the country

t) Job generation - refers to the number of jobs directly generated by the project regardless of the length of employment.


u) Marketing of Petroleum Products/Natural gas covers the following:

(1) Retailing or selling in retail generally directed to the end users, through dispensing pumps in stations or in packaged containers such as drums for the liquid fuels or metal cylinders that are compliant with PNS. This includes the establishment and operation of gasoline/natural gas stations and retailing.

(2) Fuels bulk marketing or selling in wholesale through tank trucks, lorries, double-hulled vessels/tankers, barges or pipelines, which may be sourced from one’s own storage facilities. Investment shall include underground tanks and other equipment intended for fuels retailing through outlets such as gasoline/natural gas stations and LPG/LNG outlets.

(3) A combination of storage, distribution, and marketing activities.

v) Measured Capacity - the estimated additional volume of production/ service which the Board determines to be desirable in each preferred area of investment taking into account the export potential of the product. For housing projects, the estimated housing backlog for units between four hundred fifty thousand and three million pesos (economic and low-cost housing) in the country shall be the basis of measured capacity.

w) Metro Cebu – is composed of Cebu City, Lapu-Lapu City, Mandaue City, Cordova, Consolacion, Liloan, Compostela, Talisay, Minglanilla, and Naga.

x) Metro Davao – is composed of Davao City and the adjoining towns of Panabo and Sta. Cruz.

y) Modernization Project – refers to a project of an existing enterprise that would involve improvements in systems, processes, equipment, and/or facilities that must result in any of the following:

(1) At least 25% substantial reduction of production cost/cost of provision of the service; or

(2) Upgrading of product/service quality or classification of the facility (e.g., hospitals, hotels, resorts) to a higher class in accordance with accreditation standards applicable to the industry concerned.

z) Motorcycle – refers to conventionally-powered

two or three-wheeled vehicle fitted with an auxiliary motor, with or without sidecars.

aa) Multiplier Effect - refers to the increase in economic activity and interrelationships generated and stimulated by the investment.

bb) New Plantation Area - refers to new hectarage of plantation or lands that have been idle for at least one year or those involving change of crops/variety to achieve higher yield or shifts in the production system such as organic farming.

cc) New Project - refers to a project/activity listed in the IPP that has not started commercial operation undertaken by:

(1) A newly organized/formed enterprise that:i. has no common stockholders in any

existing enterprise, orii. has common stockholders in the

existing enterprise but own not more than fifty percent (50%) of equity in the new enterprise, or

iii. has common stockholders but will engage in an entirely distinct and separate activity, or


iv. has common stockholders (regardless of percentage of common ownership) and will engage in the same activity as that of the existing enterprise but will locate in a different municipality, province, or region.

(2) An existing enterprise that shall engage in:i. an entirely distinct and different

activity from its existing business operations; or

ii. the same activity provided it shall establish a new facility2 in an area not contiguous to the premises of its existing project and with new investments.

(3) An enterprise involving the manufacture of products utilizing local R&D. Applications for registration utilizing local R&D must be endorsed by the Department of Science and Technology (DOST) stating that this was undertaken in the Philippines and has not yet been commercialized.

(4) For industrial tree plantations, an enterprise involved in the development of any public or private land to plantation of timber and non-timber species to supply the raw material requirements of forest-based industries. It also includes plantation with existing tree crops, which have not yet reached commercial harvest.

dd) Net Value-added - refers to the value of final product/service less the value of inputs. The project’s net value added should be at least 25% except for projects dependent on imported raw materials/ supplies.

2 New Facility refers to new complete line used in the production of the registered product/service separate from existing line

ee) Original Text with Annotations – refer to written works where the original text is augmented with annotations, such as additional comments, highlights, evaluation, or explanation, that are provided by the same or another author for the purpose of further analyses and understanding of the said original text by a specific audience.

ff) Original Works – are original intellectual creations in the literary and artistic domain protected from the moment of their creation and shall include in particular books, pamphlets, articles and other writings.

gg) Other Health Facilities – shall refer to the following:

(1) Custodial Care Facility – a health facility that provides long-term care, including basic human services like food and shelter to patients with chronic or mental illness, people requiring ongoing health and nursing care due to chronic impairments and a reduced degree of independence in activities of daily living.

(2) Diagnostic/Therapeutic Facility - a facility that examines the human body or specimens from human for the diagnosis, sometimes treatment of diseases.

(3) Specialized Out-patient Facility - a facility with highly competent and trained staff that performs highly specialized procedures on an out-patient basis; examples are, but not limited to the following: (i) Dialysis Clinic, (ii) Ambulatory Surgical Clinic, (iii) Oncology Chemotherapeutic Center/Clinic, (iv) Radiation Oncology Facility, (v) Physical Medicine and Rehabilitation Center / Clinic.

(4) geriatric Care Facilities.


hh) Phase - a distinct period or stage pertaining to the development or operational capacity of a project

ii) Specialty Hospital – refers to a hospital that specializes in a particular disease or condition or in one type of patient. A specialized hospital may be devoted to treatment of any of the following:

(1) Treatment of particular types of illness for a particular condition requiring a range of treatment. Examples of these hospitals are Philippine Orthopedic Center, National Center for Mental Health, San Lazaro Hospital, and hospitals dedicated to the treatment of cancer.

(2) Treatment of patients suffering from diseases of a particular organ or groups of organs. Examples of these hospitals are Lung Center of the Philippines, Kidney and Transplant Institute, and hospitals dedicated to treatment of eye disorders.

(3) Treatment of patients belonging to a particular group as children, women, elderly and others. Examples of these hospitals are Philippine Children’s Medical Center, National Children’s Hospital, and Dr. Jose Fabella Memorial Hospital.

jj) Start of Commercial Operations – shall be the date specified in the project study submitted to the Board or the date when a particular enterprise actually begins production of the registered product for commercial purposes or commercial harvest in the case of agricultural activities, whichever comes first, irrespective of phases or modules or schedule of development. In the case of service oriented activities, it shall

mean the date when a particular registered enterprise begins catering to or servicing its clients on a commercial basis. In the case of export traders and service exporters, the term shall mean the date when the initial export shipment in commercial quantity has been made or initial performance of service as borne out by the appropriate supporting documents.

For renewable energy projects (RE), start of commercial operations shall refer to the state at which the RE Plant generated the first kilowatt-hour of energy after commissioning or testing, or two (2) months from the date of such commissioning or testing, whichever comes earlier, as certified by the DOE.

kk) Storage - refers to the business of receiving/discharging and storing petroleum crude and/or products of others for compensation or profit. Storage projects are limited to those establishing new facility, i.e., depot or storage tanks.

ll) Trial Operation – refers to the initial pre-commercial phase based on 10% of the annualized sales vis-à-vis the first year of the project’s projected revenues. This shall not apply to energy projects.

mm) TSD (Treatment, Storage, and Disposal) Facilities - are the facilities where hazardous wastes are stored, treated, recycled, reprocessed, or disposed of.


D . S P E C I F I C g U I D E L I N E S

I. PREFERRED ACTIVITIES

1. Manufacturing

a. Motor vehicle (excluding motorcycles, e-bikes and golfcarts) and motor vehicle parts and components

This covers the assembly of motor vehicles, manufacture of parts and components, research & development, research/testing laboratories, and technical vocational education and training institutions.

(1) Motor Vehicle (excluding motorcycles, e-bikes and golf carts)

Projects must include the manufacture of parts and components.


Any of the following may qualify as new:a) Projects that will involve the

establishment of a factory complete with production machinery/equipment and facilities.

b) Projects of an existing motor vehicle manufacturer/assembler of passenger car/commercial vehicle that involves the production of a new model or a full model change (FMC) provided there is new investment of at least Php 200 million.

Any of the following may qualify for pioneer status:a) Projects on the manufacture/

assembly of alternative fuel vehicle and electric vehicles. Alternative fuel vehicles include hybrid vehicles, and flexible-fuel vehicles.

b) Manufacture/assembly of brand new three or four-wheel Philippine utility vehicles for cargos and/or passengers.

The project’s ITH Rate of Exemption shall be proportionate to the Logistics Efficiency Index (LEI).

(2) Parts and Components

a) Body panel stampingb) Engines, transmissions, and

transaxlec) Large injection moulded partsd) Bumpers; instrument panel; door

trims; center console; grill; wheel house finisher; lamps; shock absorber; wiper motor/blade; engine mounts; electric power steering; combination meter; instrument cluster; chassis & sub-frame; interior finishing; switches; seat mechanism; retractable seat belts; window regulator; constant

velocity joints/transmission; aluminium radiators; plastic fuel tanks; fuel pumps; brake system and components; evaporators and condensers; relays; flame laminated automotive fabric; door & rear view mirrors; automotive glass; engine parts & assembly; and transmission parts & assembly

e) Controller assembly, motor, and battery (other than lead acid) for electric vehicle

Original Equipment Manufacturer (OEM) parts and components may qualify for pioneer status.

b. Shipbuilding including parts and components

This covers shipbuilding, manufacture of parts and components, research & development, and technical vocational education and training institutions.

(1) Shipbuilding

This covers the construction of ships that are at least 500 GT and the manufacture of parts and components.

Registered enterprises must comply with Department of Labor and Employment (DOLE) Department Circular No. 1 series of 2009 on the Guidelines on Occupational Safety and Health in Shipbuilding, Ship Repair and Shipbreaking Industry.

Prior to start of commercial operation, the registered enterprise must submit a copy of its License to Operate or its equivalent from the Maritime Industry Authority (MARINA) or other concerned agency.


(2) Parts and Components

This covers the manufacture of parts and components such as but not limited to fit-outs, pumps, marine engines, navigational equipment, marine boilers, and propellers.

c. Aerospace parts and components

This covers the manufacture of aerospace parts and components, and support activities (e.g., R&D activities, research/testing laboratories, and technical vocational education and training institutions).

d. Chemicals

This covers the production of the Oleochemicals, Petrochemicals and derivatives, and Chlor-Alkali Plants products, research & development, and research/testing laboratories.

(1) Oleochemical Products

Oleochemical products include the manufacture of fatty acid and fatty alcohol.

(2) Petrochemical Products and its Derivatives

Petrochemical products and its derivatives include, but are not limited to, the manufacture of derivatives from ethylene such as ethylene dichloride (EDC) and vinyl chloride monomer (VCM); olefins and polyolefins [Polyethylene (PE), Polypropylene (PP), Polystyrene (PS), and Polyvinyl Chloride (PVC)], derivatives from propylene, derivatives from mixed C4, and aromatic derivatives.

(3) Chlor-Alkali Plant Products

Chlor-Alkali plant products include the manufacture of chlorine, alkali (caustic soda), and hydrochloric acid (muriatic acid).

e. Virgin paper pulp

This covers the production of pulp integrated with forest plantation, research & development, and technical vocational education and training institutions.

f. Copper wires and copper wire rods

This covers the manufacture of copper wire rods and enamelled wires, research & development, and technical vocational education and training institutions.

(1) Copper Wire Rod

Projects must have a minimum production capacity of 12,000 MT per year and would produce wire rods compliant with applicable international or Philippine National Standards for the production of copper wires and cables.

(2) Copper Wires

This covers the production of copper enamel wires. All enamelled wire products must be compliant with the applicable Philippine National Standards (PNS).

g. Basic iron and steel products, steel grinding balls, long steel products (billets and reinforcing steel bars), and flat hot/cold-rolled products.


All iron and steel products must be compliant with the applicable Philippine National Standards (PNS).

h. Tool and Die

This covers the production of dies and molds, research & development, and technical vocational education and training institutions.

• Simple, compound and progressive dies for metal stamping or metal forging

• Molds for die casting, for plastic injection or blow molding, glass blow molding, forging, encapsulation molds

• Jigs and fixtures for metal cutting and metal forging.

2. Agribusiness and Fishery

a. Commercial production3

(1) Coconut, corn, cassava, coffee, cocoa, fisheries, poultry and livestock;

(2) High value crops - rubber, spices, vegetables and fruits;

(3) Emerging commodities – sampaloc, jackfruit, peking duck, native pigs, siling labuyo, peanuts, monggo, and achuete.

All projects must be endorsed by the Department of Agriculture (DA).

b. Commercial processing3

(1) Extraction of higher value substances from agricultural and fishery raw materials through bioprocessing; or

(2) Conversion of agricultural and fishery products or wastes to a form ready for further processing or final consumption.

3Subject to geographical supply considerations. In the case of poultry and livestock production, this is limited to areas in ARMM, Mindoro and Palawan.

Commercial processing of agricultural products should involve the use of domestically-produced raw or semi-processed agricultural products, unless these inputs are not locally produced (NLP) or are not in sufficient quantity (NISQ).

If using imported raw or semi-processed agricultural products that are locally produced (LP) or in sufficient quantity (ISQ), the project may qualify for registration, provided that the finished/final product is for export, or the project qualifies for pioneer status.

c. Production of animal and aqua feeds excluding those for game animals, fowls and other species for pet/leisure purposes.

d. Commercial production of organic and inorganic fertilizers and pesticides.

e. Modernization of sugar mills which will increase mill efficiency measured in terms of Overall Recovery (OAR) rate to at least 85%.

f. Mechanized agriculture support services, e.g. harvesting, land preparation, spraying/dusting and other related agricultural service.

g. Agriculture support infrastructures, e.g. facilities for drying, cold chain storage, blast freezing, bulk handling and storage; packing houses; trading centers; ice plants in Less Developed Areas; AAA slaughterhouse; research & development/testing facilities; technical vocational education and training institutions; and AAA dressing plant.

For projects under (c), (d), (f), and (g) above supporting agricultural commercial production, the qualification for registration is subject to the geographical market conditions, industry roadmaps and industry clustering strategies.


3. Services

a. Integrated Circuit Design

This covers research & development, technical vocational education and training institutions, and all logic & circuit design techniques required to design integrated circuits (ICs).

b. Creative Industries/ Knowledge-Based Services4

This covers the start-ups of small newly incorporated domestic players/enterprises engaged in the following activities:• Animation • Software development5

• Game development• Health Information Management

Systems

c. Ship repair

This covers repair of all types of vessels and offshore structures.

Ship repair facilities must have a dry-docking facility with a minimum capacity of 1,500 DWT.

Prior to start of commercial operation, the registered enterprise must submit a copy of its License to Operate or its equivalent from the MARINA or other concerned agency.

4Covers start-ups of small newly incorporated domestic players/enterprises only.5Covers only those with own Intellectual Property that are developed for commercial sale.

d. Charging stations for electric vehicles

This covers the establishment of charging stations for electric vehicles. The charging stations could refer to a ‘service station’ designed to simultaneously fast charge multiple vehicles similar to gasoline/diesel stations or a network of at least 5 charging stands.

Application for registration must be accompanied by an endorsement from the Department of Energy-Investment Promotion Office (DOE-IPO).

e. Maintenance, Repair and Overhaul (MRO) of aircraft

This covers R&D activities and the establishment of research/testing laboratories, Centers of Excellence and technical vocational education and training institutions in support of the manufacturing of aerospace parts and components (or maintenance, repair and overhaul of aircraft).

f. Industrial waste treatment

This covers the establishment of treatment facilities for toxic and hazardous wastes (THW) from an industrial operation.

The following are the qualifications for registration:• Must involve treatment, storage and

disposal (TSD)• Must be capable of handling THW• Must handle only locally generated

industrial wastes.


Prior to start of commercial operation, the registered enterprise must submit a copy of its TSD Registration Certificate issued by the Environmental Management Bureau (EMB) of the DENR.

4. Economic and Low-cost Housing (horizontal and vertical)6

This covers the development of economic and low-cost housing and the manufacture of modular housing components.

a. Economic and Low Cost Housing

The following are the qualifications for registration:• The selling price of each housing unit

shall be more than Php450,000.00 but not exceeding Php3.0 million;

• Minimum of 20 livable dwelling units in a single site or building;

• Must be new or expanding economic/low-cost housing project;

• For vertical housing projects, at least 51% of the total floor area, excluding common facilities and parking areas, must be devoted to housing units.

In cases of un-incorporated joint venture and similar arrangements between landowner and developer wherein the sharing scheme is in terms of the number of lots or units built, only the share of the developer may qualify for registration.

Projects that have already been completed and have incurred sales (booked sales) of housing packages shall not qualify for registration.

6 Based on a price ceiling of Php3.0 million and subject to geographical considerations.

Any of the following may be considered as an expansion project:• Construction of additional floors or

annexes intended for housing units;• If the project will locate adjacent or

contiguous to an existing housing project owned by the same entity and shall share common facilities including access to the existing project.

All economic/low-cost housing projects must comply with the following:• Socialized housing requirement (SHR)

by building socialized housing units in an area equivalent to at least 20% of the total registered project area or total BOI registered project cost for horizontal housing and 20% of the total floor area of qualified saleable housing units for vertical housing projects.

This may be done through any of the following modes:- Development of a new settlement

directly undertaken by the registered entity;

- Development of a new settlement through joint venture arrangements with any of the following: i. Local Government Unit, ii Affiliate or other related

enterprise of the BOI-registered entity,

iii. Developer accredited by the HLURB.

In the case of joint venture projects, the BOI registered entity shall be required to provide proof of funds transferred to the implementing entity.


- Development of a new settlement through donation of land with basic infrastructure facilities (roads, water system, etc.) and/or construction materials intended for the calamity stricken areas as identified in the “Comprehensive Rehabilitation and Recovery Plan of the Areas Battered by Yolanda” in partnership either with any of the housing agencies, relevant LGUs, or with HLURB accredited NGOs.

In lieu of the above modes for compliance with the SHR, vertical housing projects may opt to donate provided: (1) the donation is made to BOI accredited NGO and (2) the amount to be donated shall be equivalent to 30% of (20% of the building construction cost based on the actual number or equivalent total floor area of qualified saleable low cost housing units) or not less than 40% of the estimated ITH. Equivalent total floor area refers to the sum total of the floor area of all the registered low-cost housing units.

• For purposes of ITH availment, compliance with the 20% socialized housing requirement shall be computed based on the actual units sold during the ITH availment period. Failure to submit proof of compliance shall result to forfeiture of ITH for that particular taxable period.

• Non-compliance with the 20% SHR on previous registrations using the ITH-based Compliance (IBC) shall result in denial of applications for registration for succeeding projects.

• Project shall conform with the design standards set forth in the Rules and Regulations to Implement B.P. No. 220/P.D. No. 957 and other related laws.

Eligible projects in NCR, Metro Cebu, and Metro Davao may only be granted three (3) years ITH unless the SHR compliance of the said projects would be undertaken in any of the identified calamity-stricken areas in the “Comprehensive Rehabilitation and Recovery Plan of the Areas Battered by Yolanda”. In such cases, said projects may be eligible to four years of ITH.

Interest income arising from in-house financing shall not be entitled to ITH.

Application for registration must be accompanied by a copy of the Development Permit issued by HLURB or concerned LGU.

Prior to registration, horizontal housing project applicant must submit copies of License to Sell (LTS) and Certificate of Registration (CoR) issued by HLURB. For vertical housing project, applicant may submit a copy of its temporary LTS provided that the copies of the final LTS and CoR shall be submitted prior to start of commercial operation.

b. Modular Housing Components

This covers the manufacture of modular housing components preferably using indigenous materials. These include roof/framing systems, wall/partition systems, flooring systems, door/window systems, and finishing/ceiling systems.

Application for registration must be accompanied by an endorsement from Accreditation of Innovative Technologies for Housing (AITECH).


5. Hospitals7

This covers the establishment and operation of general and specialty hospitals and other health facilities.

Any of the following may qualify for registration:• General Hospitals (Level 1, 2 and 3) in any

of the locations listed in Annex C-1, • General Hospital Level 3 in any of the

locations listed in Annex C-2, • Specialty Hospitals and Other Health

Facilities outside Metro Manila. Other Health Facilities include:a) Custodial Care Facilities (excluding

those for rehabilitation owing to substance abuse),

b) Diagnostic/Therapeutic Facilities (excluding Clinical Laboratory, Drug Testing Laboratory, Laboratory for Drinking Water Analysis), and

c) Specialized Out-Patient Facilities (excluding In-Vitro Fertilization Center and Stem Cell Facility).

• Geriatric Care Facilities.

Only revenues derived from medical and diagnostic services rendered by the registered entity shall be entitled to ITH. Income from lease/rent, and revenues from any other non-treatment related services will not be eligible for ITH.

Prior to start of commercial operation, the registered enterprise must submit the License to Operate from the Bureau of Health Facilities and Services of the DOH, where applicable.

Prior to availment of ITH, the registered enterprise must submit a copy of its Certificate of PhilHealth Accreditation, where applicable.

6. Energy

a. Exploration and development of energy sources (including energy crops or upstream biofuels)

7 Subject to geographical considerations.

(1) Exploration and Development of Energy Sources

Exploration and development of energy sources should be covered by a valid service contract with the Department of Energy (DOE).

Exploration projects shall only be entitled to duty free importation of capital equipment.

(2) Energy Crops

Only new plantations/growing areas dedicated for energy feedstock may qualify for BOI registration.

Applications for registration must be accompanied by a certification from the DA as provided under Section 4 of Joint Administrative Order (JAO) No. 2008-1, Series of 2008 (Guidelines Governing the Biofuel feedstock production under R.A. 9367).

b. Power generation plants8

This covers power generation projects utilizing conventional fuels (i.e., coal, diesel, bunker, natural gas, and geothermal), waste heat and other industrial wastes. Only projects that will respond to the capacity installation gap based on DOE’s five-year supply-demand forecast and will operate on or before 2019 may qualify for registration. Availment of ITH shall be on a first to operate basis.

Registration of projects shall be based on the below indicative allocation of the installation target in accordance with the Energy Supply-Demand Outlook of the DOE as of February 2015 and may be subject to re-allocation based on regional power demand and supply situation.

8 Subject to capacity installation gap based on DOE’s five-year supply-demand forecast or up to 2019, i.e., if forecast is 6000MW, then the first 6000MW capacity receives the incentives, and said installation gap will be divided among areas in Luzon, Visayas and Mindanao.


2015 2016 2017 2018 2019Luzon

(in MW) 1,300 500 500 500 50Visayas(in MW) 150 50 50 50 100

Mindanao (in MW) 50 50 50 100 100

Power projects that are built contiguous to its existing generating facilities shall be considered as expansion projects. However, if the existing base load power plant has consistently dispatched at least 80% of its registered capacity for the past 3 years, the project to be registered may be considered new.

Revenues of base load plants derived through the Wholesale Electricity Spot Market (WESM) shall not be entitled to ITH.

Within one (1) year from the date of registration, projects with loan components in their financing scheme must have achieved Financial Close; otherwise the project’s registration shall be subject to automatic cancellation. As evidence of financial closing, the enterprise shall submit a certification, in a form and substance satisfactory to BOI, issued and addressed by the lenders to BOI confirming the financial agreements are in full force and in effect.

Power generation projects located in missionary areas or off-grid areas may qualify for pioneer status.

c. Ancillary services

(1) Drilling Services for Geothermal Projects

(2) Support services such as frequency regulation and contingency reserves, voltage control, load following, reactive power support, and black start capability which are necessary to support the transmission capacity and energy that are essential in maintaining power quality and the reliability and security of the grid.

d. Energy efficiency projects

This covers the establishment of energy efficiency-related facilities and the manufacture of equipment for use in energy efficient systems.

Projects should utilize energy sources adopting environmentally-friendly technologies that comply with the Clean Air Act, the Environmental Impact System law, the Biofuels Act, where applicable, and other relevant environment laws.

Applications for registration must be accompanied by an endorsement from the Department of Energy (DOE).

7. Public Infrastructure and Logistics

a. Airports and seaports (includes RO-RO ports) for cargo and passenger

The qualification for registration of projects is based on the government’s infrastructure development policy and other relevant plans.

Application for registration must be accompanied by an endorsement from the Civil Aviation Authority of the Philippines (CAAP) or the Philippine Ports Authority (PPA), whichever is applicable.


b. Air, land and water transport (limited to brand new ships, aircraft, seaplanes, RO-RO; buses, boats, mass rail - limited to capital equipment incentive only)

(1) Air Transport

This covers passenger and/or cargo air transport operation for commercial purposes.

Lease with option to purchase an aircraft may be allowed. Acquisition of additional brand new aircraft may be registered as new.

Application for registration must be accompanied by an endorsement from the Civil Aeronautics Board (CAB), when applicable. Such endorsement must contain information on the routes to be served.

Prior to start of commercial operation of each aircraft, the registered enterprise must submit a copy of the Certificate of Airworthiness issued by Civil Aviation Authority of the Philippines (CAAP).

Only revenues derived from cargo air freight fares, passenger air fares, and revenues on refund, cancellation and rebooking fees shall be entitled to ITH. Incidental revenues such as those earned from excess baggage (including prepaid baggage), seat selector options, merchandise sales such as sale of meals/beverages, souvenirs, travel related products and other commodities, package tours and other incidental revenues as may be determined by the Board shall not be entitled to ITH.

(2) Land Mass Transport

This covers mass transport using brand new buses that run on electric batteries, and/or compressed natural gas.

The following are the qualifications for registration:• Must utilize buses with at least

Euro IV-compliant engine and using Euro IV fuel, if applicable; and

• Must have own terminal and garage that can accommodate all the buses under its franchise(s).

Application for registration must be accompanied by a copy of the application for franchise with the Land Transportation Franchising & Regulatory Board (LTFRB).

Prior to start of commercial operation, the registered enterprise must submit a copy of its original LTFRB Franchise Verification with Original Receipt.

(3) Water Transport

This covers domestic/inter-island shipping, i.e. pure cargo, passenger, and passenger-cargo vessel operations including RORO Terminal System operations.

Tankers, High-speed Craft, RORO Vessels serving primary routes and Passenger/Cargo vessels having gross weight of 150 GT and above may qualify for registration.

Application for registration must be accompanied by an endorsement of the project and proof of accreditation of the shipping enterprise by MARINA.


Prior to start of commercial operation, the registered enterprise must submit proof that the vessel is registered with MARINA and a copy of the vessel’s Class and Statutory Certificate as required by MARINA.

RORO operator/ enterprise serving missionary routes, as indicated in the Certificate of Public Convenience (CPC) issued by MARINA, may qualify for pioneer status.

Acquisition of additional brand new vessel/s may be registered as new project.

(4) Mass Rail

This covers mass rail transport system for passengers and cargoes in line with the transport development plans and programs of the Department of Transportation and Communications (DOTC).

c. LNG Storage and Regasification Facility

This covers the establishment and operation of natural gas storage and regasification facilities in accordance with relevant Philippine National Standards (PNS).

LNG gasification plants may be located on land and/or on floating barges.

The following are the qualifications for registration:• Must have new facilities• Must cater to power plants, industrial

plants, commercial establishments, etc.

• Must cater to at least one (1) clientele, other than the proponent’s own business.

The registered enterprise must submit a copy of its Permit to Operate issued by the DOE prior to start of commercial operations.

d. Bulk water treatment and supply

Bulk water supply projects must involve extraction of water from its natural source, except shallow and deep wells, and water treatment for commercial purposes. The water treatment facility shall cover the minimum basic process flow of a treatment plant (i.e. screening, mixing, flocculation, sedimentation, filtration and chlorination) with capacity sufficient to handle the volume of raw water to be supplied to its target service area.

Only new bulk water treatment and supply projects may qualify for registration. Supply of water (or distribution) should include extraction of water, treatment and installation of distribution lines and flow metering systems. Treated water should be in accordance with the PNS for Drinking Water.

Projects involving any of the foregoing areas of water operations dedicated to a particular industrial estate, industrial community, or subdivision are not qualified for registration.

Application for registration must be accompanied by a copy of the Water Permit.

Prior to start of commercial operations, the registered enterprise must submit a copy of the Certificate of Public Convenience (CPC), if applicable.

Applications covering both supply and distribution projects shall be unbundled showing the revenue and cost structure of each.


8. PPP Projects

This covers projects implemented under Republic Act No. 6957, as amended by Republic Act No. 7718 (Amended Build-Operate-and-Transfer Law).

Application for registration must be accompanied by an endorsement from the Public-Private Partnership (PPP) Center.

II. EXPORT ACTIVITIES

This covers the manufacture of export products, services exports and activities in support of exporters.

1. Production and Manufacture of Export Products

This covers the production/manufacture of non-traditional export products and with export requirement of at least 50% of its output, if Filipino-owned or at least 70%, if foreign-owned.

Export products include electronics, garments and textiles (including brassieres, gloves and mittens, and infant’s wear), footwear and leather goods, furniture, jewelry, marine and aquaculture, mineral products, and others.

In the export of mineral products, the Specific Guidelines for R.A. No. 7942 of this IPP shall apply suppletorily.

2. Services Exports

This covers service activities rendered to clients abroad and paid for in foreign currency with export requirement of at least 50% of its revenue, if Filipino-owned or at least 70%, if foreign-owned.

This also covers non-voice business processing operations such as administrative and business services including analytics, data management, engineering and architectural services.

Mere deployment of people or individual practice of profession abroad is not qualified for registration.

For contact centers, projects must have a minimum investment cost of the Philippine Peso equivalent of US$5,000 per seat to qualify for registration. This amount covers the cost of equipment (hardware and software), office furniture and fixture, building improvements and renovation, and other fixed assets except land, building and working capital. If equipment used were leased, the same should be converted to assets in terms of commercial interest rates and amortized over a five-year period. If equipment were consigned, the same should have an assigned value to be considered as part of the project cost.

In the case of contact centers, revenues shall be unbundled to show the breakdown of servicing domestic and overseas markets.

3. Activities in Support of Exporters

This covers activities directly supporting export producers as follows:

a. Manufacture of parts/components and materials and supplies directly/ reasonably needed in the production of the export product;

b. Services comprising a portion of the manufacturing process;

c. Product testing and inspection;d. Repair and maintenance; ande. Logistics services.

This also covers service providers to foreign film and television production projects in the country as endorsed by the Philippine Film Export Services Office (PFESO) as mandated by E.O. No. 674.


III. SPECIAL LAWS

1. Industrial Tree Plantation9

This covers extensive plantation of forest land of tree crops (except fruit trees) for commercial and industrial purposes.

Tree crops include timber and non-timber species such as rubber, bamboo, rattan, etc. (excluding fruit trees) for commercial and industrial purposes.

In cases of tree plantations that are joint venture agreements with other private entities, community organizations or government entities, only the share of the registered enterprise may be entitled to ITH.

Application for registration must be accompanied by an endorsement from the DENR.

2. Exploration, Mining, Quarrying and Processing of Minerals

This covers the exploration and development of mineral resources, mining/quarrying and processing of metallic and non-metallic minerals.

Mining/quarrying and mineral processing projects are limited to capital equipment incentives.

Application for registration must be accompanied by a copy of the Exploration Permit, Mineral Production Sharing Agreement (MPSA), or Financial or Technical Assistance Agreement (FTAA), whichever is applicable.

3. Publication or Printing of Books

This covers content development intended for books and publication of books in print or digital format.

9Industrial Tree Plantation (ITP) is also known as Industrial Forest Plantation (IFP) based on DENR AO 1999-53

The following may qualify as new:

• New book titles (original works, and original text with annotations), and

• First format by which the new book title will be produced or published. The succeeding format (e.g., print to digital, or vice versa) by which the same title is published will be regarded as “Expansion.”

Re-prints, revisions, and succeeding editions of existing titles will not qualify for registration.

For unpublished content, application for registration may be on a per book title or a maximum of five (5) book titles per application.

For publishing, the following will apply:

• A minimum of 10 titles with 1,000 copies each for its first print run, in case of printed books; and

• A minimum of 10 titles each, in case of e-books.

Application for registration must be accompanied by an endorsement from the National Book Development Board (NBDB).

4. Refining, Storage, Marketing and Distribution of Petroleum Products

This covers refining, storage, distribution, and marketing of petroleum products.

For gasoline retailing stations, except those locating in LDAs listed in this IPP, the applicant shall be required to invest a minimum capital of PhP10 million per station, excluding land, or such amount as may be determined jointly by BOI and DOE for augmentation purposes, as the need arises; Provided, that foreign retailers shall comply with the requirements provided under R.A. No. 8762, otherwise known as the Retail Trade Liberalization Law, and its implementing rules and regulations.


For storage, marketing and distribution, only investments of new industry participants may be entitled to incentives.

Application for registration must be accompanied by an endorsement from the DOE certifying that the applicant is a new industry participant with new investments.

For storage, marketing and distribution, petroleum products excluding liquefied petroleum gas (LPG), shall be sourced from the new industry participants as defined under R.A. No. 8479, except in cases of emergency supply situation.

For projects that involve more than one activity, i.e., storage, marketing and distribution, each must be unbundled showing the revenue streams and costs for each activity.

Blending of petroleum products alone may only be entitled to capital equipment and other non-fiscal incentives.

Applicant enterprises shall elect to be governed by the provisions of E.O. No. 226 or R.A. No. 8479 at the time of their application for registration, provided that such election once made shall be final.

5. Rehabilitation, Self-Development and Self- Reliance of Persons with Disability

This covers the manufacture of technical aids and appliances for the use and/or rehabilitation of persons with disability, and the establishment of special schools, day care centers, homes, residential communities or retirement villages solely to suit the needs and requirements of persons with disability.

Manufacturing of technical aids and appliances used by persons with disability includes but is not limited to the following:

• Walk-in baths designed for persons with disabilities;

• Commode chairs; • Braille books; • Hoists and lifting chairs designed for

incapacitated people, including stair lifts;• Wheelchairs, scooters and automobiles

using special controls or assistive technology designed for persons with disabilities;

• Hearing-aids;• Artificial limbs, orthotics, prosthetics and

orthopedic braces;• Automatic/mechanical lifts to be attached

to motor vehicle.

Application for registration must be accompanied by an endorsement from the Department of Social Welfare and Development (DSWD).

6. Renewable Energy

This covers developers of renewable energy facilities, including hybrid systems. This also covers manufacturers, fabricators and suppliers of locally-produced renewable energy (RE) equipment and components.

Application for registration must be accompanied by a copy of the DOE Certificate of Registration, Certificate of Accreditation or DOE endorsement, whichever is applicable.

Applicant enterprises shall elect to be governed by the provisions of E.O. No. 226 or R.A. No. 9513 at the time of their application for registration.


7. Tourism

This covers tourism enterprises that are outside the tourism enterprise zones (TEZs) and are engaged in the following:

a. Tourist transport services whether for land, sea and air transport for tourist use;

b. Establishment and operation of:

• Accommodation establishments such as but not limited to hotels, resorts, apartment hotels, tourist inns, motels, pension houses, private homes for home stay, eco-lodges, condotels, serviced apartments, and bed and breakfast facilities;

• Convention and exhibition facilities or “meetings, incentives, conventions and exhibition” (MICE) facilities;

• Amusement parks;• Adventure and eco-tourism facilities;• Sports facilities and recreational

centers;• Theme parks;• Health and wellness facilities such as

but not limited to spas; • Agri-tourism farms and facilities; and• Tourism training centers and institutes.

c. Development of retirement villages;

d. Restoration/ preservation and operation of historical shrines, landmarks and structures.

(1) Tourist transport

This covers transport services whether for land, water and air transport for tourist use.

Land transport covers the operation of brand new, world-class buses and/or mini-buses/coasters. The quantity or number of units of vehicles that may be allowed shall be determined based on the number of tourist arrivals in the area or the ratio of hotel/resort facilities/rooms.

Tourist transport operators must have garage, hangar or berthing/docking facilities.

Application for registration of water and air transport operators must be accompanied by an endorsement from MARINA or CAAP, respectively.

Prior to start of commercial operation, the registered tourist land transport operator must submit a copy of Certificate of Public Convenience (CPC).

(2) Tourism-related facilities

(a) Accommodation facilities

Condotel/apartment hotel/serviced apartment/ tourist inn/pension house/motel, must cater to tourists/guests to qualify for registration. For condotel/apartment hotel/serviced apartment, each unit must have fully equipped kitchen and laundry facilities.

Income arising from gaming and mall operations are not qualified for ITH.

For modernization projects, replacement of carpets, pillows, mattresses and other similar items shall be excluded from the computation of the ITH rate of exemption.

For hotels and resorts:

• The quantity or number of units of buses and/or mini-buses/coasters that may be allowed shall be determined based on the number of tourist arrivals in the area or the ratio of hotel/resort facilities/rooms.


• Accommodation establishments locating in the following areas shall not be entitled to ITH:

- Metro Manila;- Cebu City;- Mactan Island; and- Boracay Island.

Only income directly attributable to revenue generated from the hotel operations, specifically from room accommodation and income from food and beverage outlets within the hotel owned by the registered enterprise shall be qualified for ITH.

(b) Health and Wellness

This covers the establishment and operation of destination spa, resort/hotel spa, therapeutic centers, traditional healing (e.g., Philippine “hilot”, “dagdagay”, “ventossa”, etc).

(c) Tourism Training Centers and Institutes

The following are the requirements for registration:• The curriculum must be endorsed

by the appropriate industry association and approved by either the TESDA for training courses or CHED for degree courses or other concerned government agencies/authority.

• The registered education/training/learning institutions must provide training laboratories/On-the-Job facilities and equipment.

Application for registration must be accompanied by an endorsement from the Department of Tourism (DOT).

Prior to ITH availment, the registered enterprise must submit a copy of DOT accreditation.

Only income derived from tourism-related activities shall be entitled to ITH.

(3) Retirement Village

Locators engaged in the activities listed in the IPP that are related to retirement business may be registered as separate activity.

(4) Restoration/ preservation and operation of historical shrines, landmarks and structures

This covers the conservation, preservation or restoration of national sites or properties.

Projects undertaking the conservation and preservation, restoration or maintenance of historico-cultural heritage that includes any of the following may qualify for registration:

(a) National shrines, monuments, and/or landmarks

(b) Local historical sites/properties classified, identified, and listed in the National Registry of Historic Structures

(c) Cultural properties, treasures and/or artifacts.

Application for registration must be accompanied by an endorsement from the National Historical Commission of the Philippines (NHCP).

These General Policies and Specific Guidelines shall take effect immediately upon publication.

By the Authority of the Board:

ADRIAN S. CRISTOBALUndersecretary and BOI Managing Head


Province Municipality/City

ABRA

BolineyBucayBuclocDanglasDaguiomanDoloresLacubLagangilangLagayanLangidenLa PazLicuan-baay (Licuan)LubaMalibcongManaboPeñarrubiaPidiganPilarSallapadanSan IsidroSan JuanSan QuintinTayumVillaviciosa

AGUSAN DEL NORTE Remedios T. Romualdez

AKLANBuruangaLezoTangalan

ANTIQUE BelisonLibertad

BATANES

ItbayatBasco SabtangIvanaMahataoUyugan

BatangasBaleteSan NicolasSanta TeresitaTingloy

Benguet SablanTublay

Biliran

AlmeriaBiliranCabucgayanCaibiranCulabaKawayanMaripipi

A N N E X AL I S T O F L E S S D E V E L O P E D A R E A S ( L D A S )


Bohol

AlburquerqueAndaBatuanClarinCorellaCortesDagohoyLilaLoaySan IsidroSevillaSikatuna

Cagayan RizalSanta Praxedes

Camarines Norte San Vicente

Camarines SurBombonCabusaoGainza Camaligan

CamiguinCatarmanGuinsiliban MahinogSagay

Catanduanes

BagamanocBarasBatoGigmotoPanganiban (Payo)San Miguel

Cavite General Emilio Aguinaldo

Cebu

AlcantaraAlcoyBoljoonGinatilanMalabuyocPilarRondaSamboanTudela

Davao del Norte San Isidro

Dinagat IslandsDinagatLibjo (Albor)Tubajon

Eastern Samar

BalangkayanGeneral MacarthurGiporlosHernaniJipapadLawaanMaslogMercedesQuinapondanSalcedoSan JulianSan Policarpo

Guimaras San Lorenzo


Province Municipality/CityIfugao Hingyon

AsipuloIlocos Norte Adams

Ilocos Sur

Gregorio del Pilar (Concepcion)LidliddaNagbukelSan EstebanSan IldefonsoSan VicenteSanta CatalinaSigaySugpon

IloIloMinaBatadBingawanSan Rafael

Isabela San IsidroLuna

Kalinga Pasil

LagunaFamy Mabitac PakilRizal

Lanao del Norte

KauswaganLinamonMagsaysayMatungaoPantarSalvadorSapadTagoloanTangcal

Lanao del Sur

BayangButigCalanogasLumbatanMasiuPagayawan (Tatarikan)PualasSultan DumalondongTamparanTugaya

La UnionBagulinBurgosPugo

Leyte

HindangJulitaLa PazMacarthurMayorgaMeridaPastranaSanta FeTabontabonTolosaTunga


Maguindanao

Datu UnsayKabuntalan (Tumbao)MamasapanoNorthern KabuntalanSultan Mastura

MasbateBatuanEsperanzaSan Fernando

Misamis Occidental

BaliangaoConcepcion Panaon Sapang DalagaSinacaban

Misamis Oriental

BalingoanBinuanganGitagumKinoguitanLagonglongLibertadSugbongcogon

Mountain Province

BarligBesaoSabanganSadangaSagada

Negros Oriental San Jose

Northern Samar

AllenBiriCapulLapinigMapanasRosarioSan AntonioSan JoseSan VicenteVictoria

Nueva Ecija NampicuanPalayan City

Nueva Vizcaya AmbaguioVillaverde

Occidental Mindoro LoocPangasinan Santo Tomas

PalawanAgutayaCagayancilloLinapacanMagsaysay

Quezon

AgdanganAlabatJomaligPatnanunganPerezPlaridelQuezonSampaloc

Quirino Saguday



Romblon

AlcantaraBantonCalatravaConcepcionCorcueraFerrolMagdiwangSan AndresSan JoseSanta FeSanta Maria (Imelda)

Samar (Western Samar)

AlmagroJiabongMarabutMatuguinaoPagsanghanSan SebastianSanto NiñoTagapul-anTalaloraZumarraga

SiquijorEnrique VillanuevaLarenaMariaSan Juan

SorsogonBarcelonaPrieto DiazSanta Magdalena

Southern Leyte

AnahawanHinundayanLibagonLimasawaPadre BurgosPintuyanSan FranciscoSan Juan (Cabalian)San RicardoTomas Oppus


Sulu

Hadji Panglima Tahil (Marunggas)Kalingalan CaluangLugusMaimbungPanglima Estino (New Panamao)PataTapul

Surigao del Norte

AlegriaBacuagBurgosDel CarmenGeneral LunaMalimonoPilarSan BenitoSan Francisco (Anao-aon)San IsidroSanta Monica (Sapao)SisonTagana-anTubod

Surigao del Sur BayabasCarmen

TarlacAnaoRamosSan Clemente

Tawi-Tawi Turtle Islands

Zamboanga del NorteMutiaRizalSibutad

Zamboanga del Sur

JosefinaSominot (Don Mariano Marcos)TigbaoVincenzo A. Sagun

Zamboanga Sibugay Talusan


NOTES(a) Live animals born and raised in

the PhilippinesThe term “animals” covers all animal life, including mammals, birds, fish, crustaceans, mollusks, reptiles, bacteria and viruses

(b) Animals obtained by hunting, trapping, fishing, gathering or capturing in the Philippines

Covers animals obtained in the wild, whether live or dead, whether or not born and raised in the Philippines

(c) Products obtained from live animals in the Philippines

Covers products obtained from live animals without further processing, including milk, eggs, natural honey, hair, wool, semen and dung

(d) Plants and plant products harvested, picked or gathered in the Philippines

Covers all plant life, including fruit, flowers, vegetables, trees, seaweed, fungi and live plants grown in the Philippines

(e) Minerals and other naturally occurring substances, not included in (a) and (d), extracted or taken in the Philippines

Covers crude minerals and other naturally occurring substances, including rock or solar salt, crude mineral sulphur occurring in free state, natural sands, clays, stones, metallic ores, crude oil, natural gas, bituminous minerals, natural earths, ordinary natural waters, natural mineral waters, natural snow and ice

(f) Scrap and waste derived from manufacturing or processing operations or from consumption in the country and fit only for disposal or for the recovery of raw materials

Covers all scrap and waste, including scrap and waste resulting from manufacturing or processing operations or consumption in the Philippines, scrap machinery, discarded packaging and household rubbish and all products that can no longer perform the purpose for which they were produced, and are fit only for discarding of for the recovery of raw materials. Such manufacturing or processing operations include all types of processing, not only industrial or chemical but also mining, agricultural, construction, refining, incineration and sewage treatment operations.

A N N E X BI N D I g E N O U S R A W M A T E R I A L S


I N T E R M E D I A T E I N D I g E N O U S P R O D U C T S

Indigenous Materials Intermediate Indigenous Products

Abaca Abaca Pulp / Fiber

Chromite Ore Chromite Fines / Concentrates / Sand

Clay Beneficiated Clay

Coal Beneficiated Coal

Coconut Crude Coconut Oil

Copper Ore Copper Concentrates / Cathodes

Crude Petroleum Refined Petroleum Products (*)

Dolomite Beneficiated Dolomite

Industrial Stones Aggregates

Iron Ore Iron Concentrates, Ingots / Billets, Cast Iron

Limestone Hydrated Lime, Quick Lime, Industrial and Agricultural Lime

Limestone for Cement Clinker

Marble Marble Blocks

Nickle Ore Beneficiated Nickle Ore / Briquettes

Other Dimension Stones Blocks

Other Metallic Ores Concentrates / Smelting Products

Other Non-Metallic Minerals Beneficiated Non-Metallic Minerals

Other Scrap / Wastes Processed Products as raw material inputs to produce another product

Palm Oil Crude Palm Oil

Plastic Scraps and Wastes Moulding Compounds as inputs to packaging materials

Precious Metallic Ores Bullion

Rubber Latex / Crumb Rubber

Scrap Metal Billets / Ingots / Cast and Forged Products

Seaweeds Carrageenan

Seed Cotton Cotton Lint / Cotton Yarn

Silica Sand Flat Float Glass

Sugar Cane Raw Sugar


Sub-Regions and Provinces

Distribution per DOH License to Operate Category

ARMM (Autonomous Region of Muslim Mindanao)

Basilan

Lanao Del Sur

Maguindanao

Sulu

Tawi-Tawi

CARAGA Region

Agusan del Norte

Agusan del Sur

Surigao del Sur

Dinagat Island

CAR (Cordillera Autonomous Region)

Abra

Benguet

Region I – Ilocos

Ilocos Norte

Ilocos Sur

La Union

Pangasinan

Region II – Cagayan Valley

Cagayan

Isabela

Quirino

Region III – Central Luzon

Aurora

Bataan

Bulacan

A N N E X C - 1

PREFERRED LOCATIONS FOR gENERAL HOSPITALS (LEVELS 1, 2 AND 3)List of Sub-Regions and Provinces Which Did Not Meet the

DOH Standard Hospital Bed-to-Population Ratio of 1: 1,000 (DOH-HFSRB data as of December 2013)



Nueva Ecija

Pampanga

Tarlac

Zambales

Region IVA – CALABARZON (Cavite, Laguna, Batangas, Quezon)

Batangas

Cavite

Laguna

Quezon

Rizal

Region IV-B MIMAROPA (Mindoro, Marinduque, Romblon, Palawan)

Marinduque

Occidental Mindoro

Oriental Mindoro

Palawan

Romblon

Region V – Bicol

Albay

Camarines Norte

Camarines Sur

Masbate

Sorsogon

Region VI – Western Visayas

Aklan

Antique

Capiz

Iloilo

Guimaras

Negros Occidental

Region VII – Central Visayas

Bohol

Cebu

Negros Oriental



Region VIII – Eastern Visayas

Biliran

Eastern Samar

Leyte

Northern Samar

Southern Leyte

Western Samar

Region IX – Zamboanga Peninsula

Zamboanga del Norte

Zamboanga del Sur

Zamboanga Sibugay

Region X – Northern Mindanao

Bukidnon

Misamis Occidental

Misamis Oriental

Lanao Del Norte

Region XI – Davao

Compostela Valley

Davao Del Norte

Davao Oriental

Davao Del Sur

Region XII – SOCCSKSARGEN

North Cotabato

South Cotabato

Sultan Kudarat

Saranggani


1. Boracay Island

2. Cebu City

3. Lapu-Lapu City

4. Puerto Princesa City

5. Baguio City

6. Albay

7. Batangas

8. Cagayan de Oro City

9. Davao City

10. Bohol

A N N E X C - 2

P R E F E R R E D L O C A T I O N S F O R g E N E R A LH O S P I T A L S L E V E L 3


Entitlement and availment of incentives shall be subject to the terms and conditions set forth under the relevant law and the project’s Certificate of Registration as well as the rules and regulations of the implementing/administering agency.

A. Omnibus Investments Code of 1987 (E.O. No. 226)

1. Income Tax Holiday (ITH) a. Six (6) years for projects with pioneer status and for projects located in a Less Developed Area (LDA);b. Four (4) years for new projects with non-pioneer status;c. Three (3) years for expansion/modernization projects.

2. Duty exemption on imported capital equipment, spare parts and accessories; 3. Exemption from wharfage dues and any export tax, duty, impost and fees;4. Tax exemption on breeding stocks and genetic materials;5. Tax credits on imported raw materials; 6. Tax and duty-free importation of consigned equipment; 7. Additional deduction for labor expense; 8. Employment of foreign nationals;9. Simplification of customs procedures;10. Access to bonded manufacturing warehouse.

B. Revised Forestry Reform Code of the Philippines (P.D. No. 705)

Incentives under E.O. No. 226 or the following:

1. Treatment of the amounts expended by a lessee in the development and operation of an industrial tree plantation or tree farm prior to as ordinary and necessary business expenses or as capital expenditures; and

2. Deduction from an investor’s taxable income for the year, of an annual investment allowance equivalent to thirty-three and one-third per cent (33-1/3%) of his actual investment during the year in an enterprise engaged in industrial tree plantation or tree farm.

C. Philippine Mining Act of 1995 (R.A. No. 7942)

Incentives under E.O. No. 226 and the following:

1. Exemption from real property tax and other taxes or assessments of pollution control devices;2. Income tax-carry forward of losses;3. Income tax-accelerated depreciation.

A N N E X DI N C E N T I V E S F O R B O I - R E g I S T E R E D E N T E R P R I S E S


D. Book Publishing Industry Development Act (R.A. No. 8047)

Incentives under E.O. No. 226.

E. Downstream Oil Industry Deregulation Act of 1998 (R.A. 8479)

1. Income tax holiday (5 years);2. Additional deduction for labor expenses;3. Minimum tax and duty of three percent (3%) and value-added tax (VAT) on imported capital equipment;4. Tax credit on domestic capital equipment;5. Exemption from contractor’s tax;6. Unrestricted use of consigned equipment;7. Exemption from the real property tax on production equipment or machineries;8. Exemption from taxes and duties on imported spare parts;9. Such other applicable incentives under Article 39 of Executive Order No. 226.

F. Magna Carta for Disabled Persons (R.A. No. 7277)


g. Renewable Energy Act of 2008 (R.A. No. 9513)

1. Income tax holiday (7 years);2. Duty-free importation of RE machinery, equipment and materials;3. Net Operating Loss Carry-Over (NOLCO);4. Corporate tax rate of 10% after ITH; 5. Accelerated depreciation;6. VAT- zero rate on sale of fuel or power generated;7. Cash incentive for missionary electrification;8. Tax exemption of carbon credits; 9. Tax credit on domestic capital equipment and services.

H. Tourism Act of 2009 (R.A. No. 9593)


Note: The 2014 IPP GP & SG were published in the 6 April 2015 issue of the Philippine Star with effectivity immediately upon publication.

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